Have the United States and Europe pulled out of the crisis?

- "Some economists believe there will be a gradual recovery in growth in OECD countries, as the causes of the crisis are disappearing (excess indebtedness, holding of "rotten" assets) and due to the economic recovery in emerging countries."
- "Others believe there will be a renewed slump in the economies due to the excessively rapid disappearance of the stimulus provided by economic policies (reduction in fiscal deficits, especially in Europe; gradual withdrawal of unconventional monetary policies)."
- "It is certain that fiscal and monetary policies will become more restrictive. To ascertain whether this development will lead to a second dip in the economies, we have to determine whether the balance sheets of economic agents have improved enough. The crisis is actually a result of the deterioration in the balance sheets of households, banks and companies in some countries."
- "What is the situation with regard to balance sheet improvement?
• There are few countries (France, Italy) where households’ balance sheets are good enough to enable household indebtedness to (slowly) pick up again;
• Companies continue to deleverage everywhere, due to their determination to reduce their dependency on external funding;
• The banks’ situation is difficult to assess, in the absence of transparency about the value of the assets held. In several countries (United States, United Kingdom, Spain) borrower defaults are at a very high level, which points to the conclusion that many banks are still facing problems. On top of this, there is the problem of European banks’ holding of public debt."
- "All in all, it seems that it is too early in the process of improving the balance
sheets of private economic agents to bring counter-cyclical policies back to
Natixis Flash Economics 360 20100713

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