Five Steps Forward in 2011

MILAN – The worst of the financial/economic crisis seems to be over. Asset markets performed reasonably well in 2010. Growth in the United States and parts of Europe returned. Private-sector deleveraging continued, but was counter-balanced by rising public-sector deficits and debt. And emerging-market growth returned to pre-crisis levels and appears to be sustainable, helped by unorthodox policies designed to “sterilize” massive capital inflows.

But continued high growth in emerging markets depends on avoiding a second major downturn in the advanced economies, which continue to absorb a large (though declining) share of their exports. Slow growth is manageable. Negative growth is not.