Sovereign Debt Crisis Ripple Effect on the Global Economy?€¦ · debt crisis. Global slowdown has...

| Chartered Financial Analyst || March 2010 |22

Sovereign Debt Crisis

Ripple Effect on theGlobal Economy?Even as the world economy is recovering from a meltdown, a sovereign debtcrisis threatens to send it into turmoil again. Rising concerns over sovereigndebt underline the need for credible fiscal adjustment by troubledgovernments sooner rather than later.

C O V E R S T O R Y


Analyst_Mar_2010.pmd 3/23/2010, 11:03 AM22

| Chartered Financial Analyst | 23| March 2010 |

Whenever the world economyfaces financial crises, socialunrest or the boom-bust

cycles of commodities, there is charac-teristically a wave of sovereign de-faults. It is no different this time too. Inthe process of settling the dust from thegreat financial crisis, a new risk hasemerged—skyrocketing governmentdebt around the world. The deep globalrecession and massive fiscal pumpinghave put significant strain on the fiscaldeficits of the US, Europe, Japan andsome emerging economies. Some ofthem are facing the government debt toGDP ratio double-digit levels, leadingto sovereign risk pressures due to fearthat the unsound fiscal imbalancescould prompt a crisis similar to the1982 Mexican debt crisis. In the past,some countries like Spain and Austrialearnt their lessons, but countries likeArgentina are yet to learn.

Statistics indicate that sovereigndebts have totaled more than $35 tnworldwide, with the debt-to-GDP ratiohitting a record high. Major economiesinclude the US, the UK, Germany andFrance facing record debt due to largeaggregates in their public debts. Mean-while, credit rating agencies cut thesovereign debt rating for Mexico,Greece, Portugal and Spain after theDubai government abruptly announcedits plan to delay debt payments in No-vember 2009. Fitch Ratings assert that“the extraordinary sovereign interven-tion and support for the financial sec-tor, as well as fiscal stimulus packagesand the severity of the recession, haveweakened high-grade sovereign creditprofiles, making 2010 a tough year forgovernments throughout the world.”

Financial crisis combined with se-vere economic recession, worsened thefiscal position of many western econo-mies because of stimulus packages andlower tax revenues to support the finan-cial sector. Skyrocketing governmentdebt is promoting calls for stimuluswithdrawal. In fact, it is not stimulusspending, falling output is the maincause of wider fiscal deficit in manywestern countries. The impact is evensevere in countries with fiscal structureproblems, loose monetary policies

adopted in the wake of financial crisisand neglected fiscal reforms during theboom years. There is a growing concernabout the risks related to westerneconomies debt burdens as political as-surance to curb spiraling debt remainsin doubt. At this juncture, a sovereigndebt default somewhere in the worldcould be a potential force and cause thefeathering global recovery to stagger.Economists warn that even if developednations avoid outright default, theircredit ratings could be slashed which re-sult in raising borrowing and intensify-ing economic underperformance.

Financial woes in Dubai and Greecemay be just a harbinger of other storieswhich might unfold later in 2010. Therecent credit ratings downgrades anddebt auction failures in the UK, Greece,Ireland and Spain warn that unless de-veloped economies start to put their fis-cal houses in order, investors and ratingagencies would probably turn fromfriends to enemies. Feeble economic re-covery and ageing population is likely toincrease the debt burden in Japan, theUS and the UK and several otherEurozone countries in the coming days.According to IMF recent report, publicdebt in advanced G20 economies willrise from 78% of GDP in 2007 to 118%in 2014. It suggests that even fastergrowth would help slow the rise in debtbut would not break it, underscoring theneed for increased taxes and reduceddiscretionary spending. Accordingly,sustaining growth should remain toppriority if they want to break the debtspiral.

New phase of global crisisGreece is at the center of the sovereigndebt crisis. Global slowdown has madethe difficulties of the euro become moreprominent, particularly for the periph-eral areas of the 16-nation Eurozonecountries including Portugal, Ireland,Italy, Greece and Spain. After Greecejoined the EU and adopted the euro in2001, it went on a borrowing binge.When bond rating agencies downgradedthe country’s debt in December 2009, itwas running a budget deficit amountingto 12.7% of GDP which is higher thanthat of Spain and twice the Eurozone


| Chartered Financial Analyst |



In reaction to the financial crisis, many countries have put themselves atthe risk of overextending their fiscal positions and being burdened withextremely high levels of debt. How do you view the global economicrecovery fueled by unsustainable amounts of spending in China, the US,the UK, and literally everywhere?As stock markets around the world at least seem to be stabi-lizing and economic sentiments less dire, there is a risk of aslightly self-congratulatory sense of relief. That somehow theworst of this tsunami of a global financial crisis didn’t quitehappen. That we have learnt from the past and have ‘gottensmarter’.

Well, McKinsey Global Institute has just published a re-port pouring a sobering quantity of cold water on such smug-ness (Deleveraging: Now the Hard Part, McKinsey Quarterly,January 2010). Looking at past financial crises, there is a10-year historical trend in the build-up of the ratio of debt toGDP, followed by one to two years of economic downturn asleverage continues. Then a period of two to three more yearsof economic downturn sets in as deleveraging begins in ear-nest. While deleveraging is taking its course, what follows isa period of economic rebounce as GDP growth picks up whilethe debt ratio is gradually restored to normal levels.

The need for sobriety was heralded in an earlier paper“The Aftermath of Financial Crisis” by Carmen Reinhartand Kenneth Rogoff, which was presented at the AmericanEconomic Association meetings in San Francisco, January 3,2009. This shows the aftermath of severe financial crises isusually characterized by deep and lasting effects on assetprices, employment and output. Housing price drops andrises in unemployment extend over five and six years respec-tively, although output declines last only two years on aver-age. The end of recessions sparked by financial crisis is al-most invariably accompanied by massive increases in gov-ernment debt.

The above analyses show that after a major financialcrisis, the subsequent recession could last three to fiveyears while the whole deleveraging process could be longand painful, taking from six to eight years. Against anestimated global GDP of about $50 tn, the Bank for Inter-national Settlements in Basel, Switzerland is reported tohave quoted a global derivatives market of $1.144 qua-drillion in the current financial crisis, taking into accountthe full range of instruments including listed and Over-the-Counter (OTC) credit derivatives, interest rate de-rivatives, credit default swaps, foreign exchange deriva-tives, commodity derivatives, equity-linked derivatives

“While the risks of unsustainable debt levels are there, whether they would lead tofull-fledged sovereign debt crises in 2010 depends on how far and how long thebigger Western economies continue to turn a blind eye to these risks.”

Cover Story

Andrew K P Leung*

and other ‘unallocated derivatives’. That’s a lot ofdeleveraging to do in a short time.

What is worrying is that in the aftermath of the currentfinancial crisis, the real deleveraging may start later.While any economic recovery is still fragile and consumerconfidence remains anaemic, banks are extremely cau-tious with lending notwithstanding an abundance of gov-ernment-provided liquidity. Meanwhile, governments arepolitically impotent to impose strong medicine and in-stead try to pump-prime economies with more publicspending and even more liquidity turned on by the moneyprinting press. The more anodyne name, QuantitativeEasing (QE) is of course preferred. While all this is goingon, fiscal deficit of the United States jumped from 3.2% ofGDP in 2008 to 10.0% in 2009; in the euro area, from 1.9%of GDP to 6.9%; in the UK from 5.5% to 11.9%; and inJapan from 6.9% to 9.1%.

This time around, for a change, the Emerging Markets,China and India, in particular, may help a little to cushionthe pain of the world economy (Nomura Global Economics,2010 Global Economic Outlook – A Tale of Two Recoveries,December 16, 2009). However, China is extremely wary ofher own asset bubbles created by overlending. She istreading a tightrope balancing between pushing growth forher needed 20 million extra jobs a year and overheating.Her own consumption growth is picking up rapidly. But itwould still take years before she manages to rebalance hercontinental-sized economy away from export-led growthprone to external shocks. But above all, the emerging mar-kets can’t help much with the process of deleveraging. Itseems that before champagnes are opened, there is a greatdeal more bitter medicine to be swallowed, and for a fairlylong time. Do you subscribe to the notion that the global financial system remainsfragile with sovereign debt posing a risk to markets and substantiallosses expected from commercial real estate?In The Coming Sovereign Debt Crisis, published in Forbes onJanuary 14, 2010, Nouriel Roubini, the New York Universityeconomics professor and co-author Arpitha Bykere , sounded acharacteristic warning bell. The global downturn hit the taxrevenues of several developed nations hard, at a time whenthey are spending billions on stimulus and financial sectorbailouts. Unemployment remains high and their ageing popu-lation profiles continue to put pressure on government bud-gets. The authors argue that if countries should continue withloose fiscal and monetary policies to support growth instead of




focusing on fiscal consolidation, government debt will begrowing so high that investors may stop buying the bondsissued by some countries. UK, Spain, Greece and Ireland arefacing sovereign risk pressures, if their fiscal imbalances arenot addressed immediately. These clarion calls are echoed inThe World Economic Forum’s Global Risk Report, also pub-lished on the same date, which warned that in the final analy-sis, unsustainable debt levels could lead to full-fledged sover-eign debt crises.

I am not certain whether commercial real estate losseswould be the trigger of another financial crisis. But with highvacancy rates due to the weak economy and with propertyloan books sustained at historically low interest rates, anyupturn in the interest-rate cycle fueled by rising fears of infla-tion runs the risks of a domino-style collapse across the wholespectrum of property asset classes. Do you think that government’s unprecedented programs like fiscal andmonetary support have come at the cost of significant increase of risk tosovereign balance sheets and a consequent increase in sovereign debtburdens that raise risks for financial stability?It seems that a kind of Keynesian fundamentalism has beendoing the rounds in the early responses to the financial crisis.But once started, and the economy is still not out of the woods,it is politically difficult to stop, particularly in face of loomingelections. There are obvious danger signs ahead but govern-ments largely remain in denial, at least overtly, for the timebeing. How far unsustainable debt levels in nations around the world couldlead to full-fledged sovereign debt crises in 2010? Will growing govern-ment debt force a default in Japan?First and foremost is the United States, by far the largesteconomy in the world and the issuer of the world’s leadingreserve currency. Although the medium-term outlook of thegreenback continues to be gloomy, what Paul Krugman callsthe US Dollar Trap suggests there are hardly any markedlysafer and better alternatives. Nevertheless, while the risk ofa US sovereign default remains rather slim, there may comea point when the US dollar may appear increasingly unat-tractive with low interest yields and a declining exchangerate. When more and more of the bigger funds and centralbanks are gradually diversifying away from the greenback,this may trigger a potentially destabilizing spiral, if not animmediate stampede, that could affect confidence insmaller problematic countries by contagion.

A similar worry applies to the UK economy and the Brit-ish pound. Although the UK’s prospects seem bleaker, atightening about-turn is very much on the cards, especiallyfollowing the coming General Election in May. Japan, as thesecond largest economy for the time being, is still a netsaver, backed up by over $1 tn in the world’s second largestforeign currency reserve. China, set to overtake Japan’seconomy this year, is rebouncing with relatively enviablegrowth rates with very low debt levels. She is deeply con-cerned about the domestic risks of over-liquidity and is al-ready reining in the credit flow. Smaller countries likeGreece and Ireland remain highly wobbly but both are

implementing vigorous austerity programs.Even if we assume that the International Monetary Fundwould simply stand by with folded arms to allow somesmaller countries to fail, it is unlikely to snowball into aglobal meltdown provided the bigger countries start vigor-ously to put their own houses in order. Countries like Greece, the UK and Germany are a tip of the iceberg andare struggling to find a self-sustaining recovery? Elucidate.Greece, Ireland and to a similar extent, Spain, all haveoverextended themselves with loose money policies feedinginto a collapsing property bubble. At the same time, all aretrying to rescue their economies from the financial crisiswhen government revenues are hit hard by the economicdownturn. In the case of Greece, her debts are forecast torise to 120% of GDP in 2010. Similar predicaments areshared by some of the bigger countries like the UK, whosedebt is forecast to rise to 100% of GDP this year.

Germany has fared better as public and private bor-rowings have been less cavalier. Moreover, falls in herconsumption sector including cars are offset by healthygains in her exports of machinery, largely to China. Never-theless, ZEW, the Germany-based Centre for EuropeanEconomic Research, expects any recovery would be a longhard slog.

All of these countries need to rethink their economicmodels in the interest of long-term sustainability. Ratherthan depending on the financial, consumption and prop-erty sectors, more attention will have to be given to high-end manufacturing, science, technology, innovation andcreativity that stay several steps ahead of the game setby mass producing manufacturing powerhouses likeChina. Additionally, all have to improve the productivityof their public sector rather than focusing mainly on howmuch will be spent on what in order to please the voters.According to you what are the government’s likely policy optionsavailable to minimize the implications of ballooning sovereign debt?Politicians have to be upfront with their electorates that apainful belt-tightening is in order for a few more yearsrather than continuing to inebriate fiscal prudence withthe drug of easy money. This candidness needs to bematched by a credible program of national economic re-structuring to confront the paradigm shifts in the 21st cen-tury, not by resorting to defeatist protectionism howevernuanced, but by harnessing the ingenuity, resourcefulness,and competitiveness of their peoples.

Jared Diamond has a salutary tale to tell in his inter-esting book about lost civilizations entitled Collapse, HowSocieties Choose to Fail or Succeed (Penguin Books, 2009). Acomparison of the lack of foresight of the Greenland Norsesettlers and the ingenuity of the native Inuit is instructive.The story of survival, adaptation and transformation is asrelevant for the sustainability of past civilizations as forthe modern zeitgeist of the 21st century.

* Chairman,Andrew Leung International Consultants Limited, London





Cover Story

Amidst pan-European debt spiral, there arereigniting fears that the US could be next and thereis no easy way out from debt crisis.

average. Portugal budget deficit haspeaked substantially higher than previ-ously forecast at 9% of GDP, whileSpain’s deficit for 2009 will be 11.4%.

The skyrocketing debt of these na-tions is raising questions about the vi-ability of the euro itself. There is in-creasing public speculation that the 11-year-old currency could collapse underthe pressure of the economic and finan-cial crisis. The Greece sovereign debtcrisis has stoked worries about EUmembers with high debt levels, particu-larly Portugal, which is now sufferingapolitical crisis, in what one pundit fan-cifully called another round of Eurozonesovereign debt whack-a-mole. The prob-lem is even more for trading nationslike Canada, a major producer and ex-porter of commodities as their pricemovements have a big impact on nomi-nal GDP and government revenues.Analysts ponder that these countries’budget deficit issues concern more fun-damental economic problems thatcould jeopardize the future of the euro

and stifle global growth as weakerEurozone members will throw the worldeconomy into a ‘double-dip’ recession.

Island’s debt at riskThough markets are nervous aboutholding the sovereign debt of thesmaller Eurozone members, these prob-lems should prove manageable if theregion continues to recover. However,among the major economies, Japan of-fers the greatest source for worry in thenear future. Though Greece is just thestarter of the debt crisis, Japan is the

first country to feel the pinch as thedebt-to-GDP ratio has grown from 65%in the early 1990s to over 200% now, thehighest among advanced economies.The IMF expects Japan’s gross publicdebt to reach 227% of GDP in 2010 andwarned that market concerns over fiscalsustainability and political uncertaintyhave led to a widening of credit defaultswap spreads.

Japan’s debt burden is a legacy ofmassive government spending in the1990s after the asset bubble burstwhich led to a decade of stagnation. Inthe recent past, rising ageing popula-tion have added considerably to thedebt burden. Fortunately, Japan hasalmost no foreign currency-dominateddebt obligation as the high savings ratehas allowed governments to finance the

deficit internally. Analysts say, “this isthe key reason why Japan gets awaywith paying only 1.3% on their 10-yearbonds when other large OECD countriesmust pay 3-4% to attract investors.”Like Japan, India has a high govern-ment debt to GDP ratio of 75%, but it isfinanced almost entirely from domesticfunds given its high savings. However,JPMorgan Chase Analyst MasaakiKanno in Tokyo says that “Japanesebonds are in a bubble that could pop inthe next three to five years, as savingsrates drop. Even if the government can

somehow keep borrowing at a 1.4% in-terest rate, interest expense will rise toroughly $200 bn by 2019, or 45% of gov-ernment revenue, unless it pushesthrough a big increase in the nationalvalue-added tax.” However, those ratesare unlikely to hold as the Japanese gov-ernment has been able to replace bondspaying as much as 7% interest withsteadily lower-rate debt over the years.

Is the US next?Amidst pan-European debt spiral,there are reigniting fears that the UScould be next and there is no easy wayout from debt crisis. The CongressionalBudget Office (CBO) forecasts a whop-ping $1.6 tn deficit this year, whichwould come to 10.6% of GDP, the worstin modern times. Just like other devel-

2010 Projected Sovereign Debt Issuance

India

Rest of the world 19%

United States45%

11%6%

5%

4%

4%

3%

3%

China

France

Spain

Germany

UK

Japan



Mc GrawHill



Cover Story

In reaction to the financial crisis, many countries have put themselves atthe risk of overextending their fiscal positions and being burdened withextremely high levels of debt. How do you view the global economicrecovery fueled by unsustainable amounts of spending in China, the US,the UK, and literally everywhere?If one looks at China and the US, they are now cutting back onmaking loans. The stimulus money for consumers to purchasenew cars in the US has come to an end and the loan mortgagebailout is also ending. The debt level in the US was recentlyraised by $1.9 tn and instead of new stimulus money goinginto the US economy the US Federal government is comingunder increasing pressure to deal with the large budget deficitthat keeps rising. One needs to realize, even with the globalfinancial crisis both China’s and India’s economy still grew.China’s economy is currently growing at 10%. The US economyin the 4th Quarter, 2009 grew at a 5% rate but one must realizethat was with a much smaller economy than before the finan-cial crisis. Brazil did fine in the financial crisis since a largeportion of their economy is agriculture and people still have toeat. People can cut back on the goods and services they buy butcan cut back very little on the amount of food they eat. With thefinancial crisis, the number of people going on diets may haverisen as they cut back financially. In the US, banks are raisinginterest rates they charge their customers which means theconsumer will have less money to make purchases with andthat will also aid in slowing down the recovery since they willbe buying fewer goods and services.Do you subscribe to the notion that the global financial system remainsfragile with sovereign debt posing a risk to markets and substantiallosses expected from commercial real estate?We agree that the global financial markets are fragile but theworld needs to be divided in looking at commercial real estate.During the global financial crisis, Chinese citizens came to theUS buying up the cheap property after the housing collapse.Other country citizens did the same thing: buy cheap US realestate. Now with the US economy starting to rebound invest-ing in property may be a wise financial buy as property valuesare starting to rise again. China on the other hand, may have ahousing bubble burst as their economy keeps booming whichcould threaten global financial markets.Do you think that government’s unprecedented programs like fiscal andmonetary support have come at the cost of significant increase of risk tosovereign balance sheets and a consequent increase in sovereign debtburdens that raise risks for financial stability?In the US, the Federal Government cannot continue with largeamounts of stimulus money to prop up the 10% unemploy-ment rates. The deficit has become too high to continue to dothat. As we wrote in the paper, “The Retooling of the USEconomy”, this is basically the equilibrium level now. Jobgrowth will be part-time sector as the economy grows. Therewill be fewer new full-time positions now. China’s economygrowing at 10% and India’s growing economy should help tomaintain unemployment rates of about 4% for their countries.

Since Obama and the other G8 countries disbanded and nowonly deal with a G20 annual meeting that is some indicationas to how dependent the G8 countries have become to the un-developed world. The US and EU and Japan need the undevel-oped world’s goods, services and food to continue.How far unsustainable debt levels in nations around the world couldlead to full-fledged sovereign debt crises in 2010? Will growing govern-ment debt force a default in Japan?To see how far unsustainable debts levels are, all one needs todo is look to Dubai had to be bailed out. Countries are trying tocut back but revenues continue to fall. Obama is capping gov-ernment programs in the US and will cap what they canspend. Stimulus money will become more scarce globally. Theother countries could not allow Dubai become insolvent andthey cannot let Japan either. It would cause a major globalmeltdown if the number 2 economy in the world defaulted. Theother countries would have to bailout Japan putting morepressure on their economies.Countries like Greece, the UK and Germany are a tip of the iceberg andare struggling to find a self-sustaining recovery? Elucidate.One needs to realize that Greece, the UK and Germany belongto the European Union (EU). They get tariff breaks in sellingto other EU countries which helps them export their goods.China has now surpassed Germany in the amount of exportsthey sell. The EU can bail out the member countries and pro-vide trade incentives to them to help their economies. The EUmember countries could actually help themselves by further-ing trade amongst themselves. The EU could also addUkraine to their membership opening new markets. Theyhave rail service all the way to Asia and that is a booming areaglobally now with 60% of the world market being there.According to you what are the government’s likely policy options avail-able to minimize the implications of ballooning sovereign debt?Governments are going to need to raise taxes on householdsand freeze government department budgets. If the govern-ments raise taxes, they can pay down the debt and also hiremore workers which would have a multiplier effect on theeconomy. If the countries don’t raise taxes, they cannot con-tinue to offer the services they offer. They will not be able topay down the deficits either. China, India and Brazil are inenviable situations in that the goods and services they pro-duce are cheaper than US and EU goods and they can increaseexports stimulating their economies. The goods and servicesare also cheaper for their citizens. The US and EU consumerscould not buy as many products if it was not for China, Indiaand Brazil and Southeast Asia with their cheaper goods. Itwill be interesting in the US how state governments deal withthe stimulus money running out and then having dwindlingrainy day funds to use.

*Associate Professor and Head of Technical ServicesWashington State University, Washington.

**Associate Professor Dellenbarger & AssociatesLos Angeles, California.

Lihong Zhu * Lynn E Dellenbarger**




Reference # 01M-2010-03-05-01

– N Janardhan Rao

A balanced budget is the need of the hour forsovereign entities to avoid a serious debt bubbleburst.

oped nations, the US government re-sponded to the financial crisis by takingon the debts of banks and essentiallybankrupting its treasury in order to pre-serve the wealth of its financial elite.Now the Obama administration likethe governments of Europe is demand-ing that the cost be borne by the generalpublic in the form of sweeping cuts inbasic social programs and a reductionin consumption.

Many economists warned in 2009against the US policy of flooding finan-cial markets with cheap credit on thebasis of near-zero interest rates and theelectronic equivalent of printing a tril-lion dollars—designed to prop up themajor US banks and enable them torecord bumper profits despite double-digit unemployment. Benn Steil, SeniorFellow at the Council on Foreign Rela-tions and author of Money, Markets andSovereignty says: “The economy over thelast six months has been on a sugarhigh. If Congress and the Obama Ad-ministration don’t trim deficits, Ameri-cans will get to the point where credit ismuch more expensive in the US than itever has been in the past.” Many strug-gling states and local governments arealready having trouble paying theirbills are turning to Washington for fi-nancial aid. Brian Coulton, Head of glo-bal economics at Fitch Ratings in Lon-don warns that once rock-solid econo-mies like the US and the UK could joinshakier nations like Japan and Irelandin losing their ‘AAA’ ratings, if theydon’t get their bad habits under control.However, economists like PaulKrugman have argued that US debt re-mains manageable at current levels.

Stifling recovery mattersThe big question that pundits are dis-cussing is the impact of soaring govern-ment debt on the global economy andmore importantly, how governmentsaround the world are likely to deal withtheir fast looming debt obligations.They are of the view that it is not pos-sible to reduce that debt too quicklywithout stifling global economic recov-ery. If the US economy witnesses afairly robust recovery, then the deficitshould go down on its own. However,

western economies must consolidateconsiderably their government spend-ing over the next two or three years. IanStewart, Director, Deloitte Research,UK suggests that “the ideal solutionwould be to have a credible plan togradually reduce that deficit over time,so that financial markets would beconvinced that it wouldn’t be a problemin the future.” If this does not happen,governments in these countries have toface large deficits and will have to com-pete with private investors for scarcefunds and will drive up long-term in-terest rates. A balanced budget is theneed of the hour for sovereign entitiesto avoid a serious debt bubble burst.However, given record unemploymentlevels, feeble economic recovery mayprobably prevent any drastic mea-sures like mild interest rate hikes to

squeeze liquidity and stabilize finan-cial market. Governments have to con-stitute a feasible and reliable solutionto avoid a new round of trust crisisfrom the markets regarding their capa-bilities in containing deepening publicdebts.

The road aheadSovereign default of any nation couldmean economic disaster as fundingsources dry up. Altogether it will lead tosignificant unemployment levels as in-

frastructure projects would come to astandstill and a social and political dis-order cannot be ruled out. The tremorsof subprime meltdown and the collapseof mighty financial institutions con-tinue to ripple through the financialmarkets and the global economy. Gov-ernments poured immense amounts oftaxpayer funds to prevent succeedingcrises. But they accomplished it at a bigprice—dreadful sovereign debt hangingover most of the western world andracking financial pain and feeble eco-nomic growth. The financial crisis andresulting economic recession have cre-ated a more vulnerable environmentwhere today’s risks may becometomorrow’s crises.



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