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Gazelles and Turtles

MUNICH – The world’s worst post-war financial crisis is over. It arrived suddenly in 2008, and, after roughly 18 months, vanished almost as quickly as it had come. Bank rescue programs on the order of €5 trillion and Keynesian stimulus programs on the order of a further €1 trillion staved off collapse. After falling 0.6% in 2009, world GDP is expected to grow this year by 4.6%, and by 4.3% in 2011, according to International Monetary Fund forecasts – faster than average growth over the last three decades.

The European debt crisis, however, remains, and markets do not fully trust the current calm. The risk premia that financially distressed countries must pay remain high and signal continuing risk.