restricted access Introduction and Overview

The global debt crisis will keep the world economy in a straitjacket for some time and reinforce the shift from established economic powers to Asia. Debt needs to be repaid in the form of lower consumption and the deleveraging process for the G-3 (the United States, the eurozone, and Japan, who have reached an unprecedented level of debt), still has a long way to go. The United States opted for fiscal and monetary stimulus, the eurozone chose austerity, and Japan after some hesitation started to pump money into the economy. It remains to be seen whether the divergence in policies will constitute a barrier for a global recovery. Southeast Asia has so far managed quite well because the lesson was learned in 1997-98 and signs of strong borrowing have been detected only recently. The main problem seems to be how to plug into a new and amended global financial system that has emerged in response to flaws that were identified when the crisis struck.