ISAS Insights

Dark clouds have appeared on the horizon, just as confidence had increased among consumers and investors that the worst was over for the global economy. The clouds have gathered mostly for political reasons. The Europeans ÔÇô the Germans in particular ÔÇô have concluded that they cannot take the risk to persist with expansionary policies. They were discouraged to stay on course by their own history as well as by the nasty jolts delivered by the Mediterranean economies. It took some extraordinary jaw-boning by the United States President Barack Obama to convince German Chancellor Angela Merkel to come to the assistance of the almost bankrupt Greece. The American president saw his own set of problems emerge when a highly vocal and noisy part of his electorate began to question the wisdom of his approach to build a mountain of debt to revive an economy that has been stubbornly resisting recovery. These setbacks have made it difficult for the worldÔÇÖs large economies to work together within one economic framework. At the G-20 meeting in Toronto, leaders failed to agree on a common path on which they will be prepared to travel. Asia is the only silver-lining on the horizon. This raises the question whether it has the weight and political will to guide the rest of the world.