If 2011 was the year of the euro crisis, what issue will have the greatest impact on the global economy in 2012?
Our global team of Carnegie international economic experts answer in 250 words or less…
Euro crisis combined with further slowdown in China.
Euro crisis.
In 2011, two issues dominated the global economy—the economic travails of Europe and the Arab Spring. In comparison to these two, other events of global significance—political gridlock in the United States, the earthquake-tsunami-nuclear nightmare in Japan, and continued rapid growth in China—pale in significance. The euro crisis, which successfully slowed the recovery not just in Europe but worldwide, and threatens to pull the entire global economy into recession next year, will continue to be the dominant issue in 2012. The revolution sweeping the Arab world will have fewer short term repercussions (in part because the price of oil will remain depressed due to a weak global economy), but may turn out to be the more significant event shaping geostrategic forces in the Middle East over the long term—especially if Iran emerges as the dominant power in the region.
Finally, the joker in the pack is the recent demise of Kim Jung Il and his succession by Kim Jung Un. Will this turn out to be the last straw that breaks the back of the brittle regime in North Korea and the fragile peace between the two Koreas, and either ruptures the ties between China and the United States, or cements them in common cause to prevent any nuclear fallout? Sometimes, its these seemingly innocuous events in a far corner of the world that turn out to be the butterfly wings that cause devastating storms elsewhere.
I think the most destabilizing events will play out in Europe, although we should also see a dramatic increase in domestic pressures for Chinese rebalancing, and this may end up occupying many of the headlines in 2012.
The euro crisis will again have the greatest impact on the global economy in the coming year. Either the worst alternative outcomes are avoided in Europe, which would show that rational policies may win, or there is a collapse of some kind, with unforeseeable consequences.
Euro crisis combined with further slowdown in China.
Euro crisis.
In 2011, two issues dominated the global economy—the economic travails of Europe and the Arab Spring. In comparison to these two, other events of global significance—political gridlock in the United States, the earthquake-tsunami-nuclear nightmare in Japan, and continued rapid growth in China—pale in significance. The euro crisis, which successfully slowed the recovery not just in Europe but worldwide, and threatens to pull the entire global economy into recession next year, will continue to be the dominant issue in 2012. The revolution sweeping the Arab world will have fewer short term repercussions (in part because the price of oil will remain depressed due to a weak global economy), but may turn out to be the more significant event shaping geostrategic forces in the Middle East over the long term—especially if Iran emerges as the dominant power in the region.
Finally, the joker in the pack is the recent demise of Kim Jung Il and his succession by Kim Jung Un. Will this turn out to be the last straw that breaks the back of the brittle regime in North Korea and the fragile peace between the two Koreas, and either ruptures the ties between China and the United States, or cements them in common cause to prevent any nuclear fallout? Sometimes, its these seemingly innocuous events in a far corner of the world that turn out to be the butterfly wings that cause devastating storms elsewhere.
I think the most destabilizing events will play out in Europe, although we should also see a dramatic increase in domestic pressures for Chinese rebalancing, and this may end up occupying many of the headlines in 2012.
The euro crisis will again have the greatest impact on the global economy in the coming year. Either the worst alternative outcomes are avoided in Europe, which would show that rational policies may win, or there is a collapse of some kind, with unforeseeable consequences.