First the banking crisis, then the sovereign debt crisis, which could easily turn back into a banking crisis, and conditions in the money markets suggest it could already be doing so. Can anything stop what equity markets have already decided will be a downward spiral into another big recession?
The fear of that is not just being felt in the markets. In boardrooms across the world, business leaders are putting decisions on hold pending. Such delays can become self-fulfilling. In Britain the long overdue recovery in business investment is being pushed further into the future.
The banking crisis, which began in the summer of 2007, took until the autumn of 2008 to enter its deadliest phase. If we take the start of the Eurozone crisis to be May 2010, and the first Greek rescue (though in practice it was building for some months before that), the time taken to get its deadliest phase looks superficially similar.
There is an important difference. The banking crisis took time to unfold for good reason. Nobody with practical experience of policy had seen anything like it. At each stage events could have turned out differently. After the officially-supported takeover of Bear Stearns in March 2008 there was every expectation that the same procedure would be followed with Lehman Brothers.
The fact that it was not is a grave stain on US policymakers. It was not, however, clear in the summer of 2007 it would come to that. When the crisis at Lehman hit they had to act quickly and, as it turned out, failed.
Since May 2010 and the first rescue of Greece it has been clear that the Eurozone crisis could only get worse. The absence, from the start, of a coherent recovery route for Greece out of her debt and deficit problems ensured Greece would be back for more and other countries would also need to be rescued.
Those rescues are not all doomed. Ireland, for example, gives grounds for optimism and Portugal’s prospects do not look as dire as those of Greece. As long as Greece’s situation is so dire, however, it risks pulling down the entire Eurozone house.
What should be done? At the time of the International Monetary Fund/World Bank meetings in late September talk began to emerge of a “grand plan” for the Eurozone, involving leveraging the €440 billion European Financial Stability Facility to €2 trillion or more, recapitalising those European banks that need it and allowing Greece a 50% default on her debts.
After that flurry of excitement, European ministers and officials have spent their time playing down expectations of such a grand plan. The firmest putdowns, significantly, have come from Germany, ultimately the paymaster. Whatever Europe comes up with in time for the meeting of G20 leaders in France in early November, it seems, it can only disappoint.