This is one of those times when you need a guide through the maze. The euro zone crisis is playing itself out, amid warnings from the likes of Christine Lagarde, managing director of the International Monetary Fund, that the world’s “collective future” depends on the ability of European politicians to get us out of the quagmire. The risk, she and others have said, is of a downward spiral.

 

It is not hard to find other examples of deeply gloomy punditry. In Britain, following figures that showed gross domestic product down by 0.2% in the final quarter of 2011, the fear is that the economy is on the brink of the dreaded double-dip. Think tanks warn that unless the government changes course the economy will remain locked in the longest recession since the 1930s.

 

Something else, however, is happening, which presents a rather different picture. Stock markets have had a great start to 2012. The FTSE 100 has risen to its highest level since August, when fears about the euro and a new banking meltdown struck.

 

Shares in America have been doing even better, with the Dow Jones industrial average at its highest since May 2008 – before the worst of the global financial crisis – and the technology-heavy Nasdaq index at its highest for 11 years.

 

Are the markets mad to ignore the warnings, or do they have a better judgment on the dangers? My sense of it is that the markets have come back from the brink because things look better than they did a few months ago, certainly in the eurozone where large-scale assistance to the banking system by the European Central Bank has helped. More particularly, growth in America and China, the world’s two biggest economies, has exceeded expectations.