Stimulus packages

Much of this can be put down to the stimulus packages, which have been without question enormously successful in preventing, easing, or perhaps just deferring recession.

Withdrawing those packages will require all the delicacy and finesse of extracting a royal flush from the bottom of a house of cards - which is why the G20 was so keen to assure the markets that nothing gets withdrawn until the recovery is well in place.

That may be some time. The Europeans have been celebrating the fact that Germany and France are out of recession. Yet there are some serious reasons to be concerned about future growth, and most of them lie to the east.


Six months ago there was a real fear that the Baltic states, Ukraine and several of their neighbours could go into meltdown. The International Monetary Fund and the European Central Bank stepped in with ready cash and disaster was averted.

The stock market response to the crisis was justified. The Ukrainian market, for example, fell 83% from its peak. The response to the recovery (in Ukraine's case a 183% rise from the trough in March), is less so. Then again one expects such volatility from emerging markets.

What one expects less is such a strong rebound in markets that have extensive links with these fragile states. The IMF pointed out this week that European banks have written down only 40% of their bad loans. That failure to recognise dodgy debt lies largely in continental Europe, among banks that have heavy exposure to Eastern European economies.