The financial crisis reached a peak in the months of October and November 2008, in the wake of the Lehman Brothers collapse, with the financial markets undergoing an extreme dislocation. As many had feared since the subprime mortgage crisis began in 2007, this led to a severe worldwide recession whose outcome remains uncertain to this day.

The transition to the final phase would be a crisis on par with the 1920s, with a series of depressionary forces created by the de-leveraging movement sparking a long-term drop in consumption, prices and investment and a growing number of bankruptcies exacerbating unemployment. We expect this scenario to be avoided, however.
The decline in international trade over recent months clearly illustrates the severity of the current recession and has permanently eliminated the decoupling theory which claimed that demand from Asia (China, India, etc.) would drive global demand.

China is also facing a sharp slowdown in its astounding growth, stemming from a fall in exports and consumption. Japan’s grace period is also over – orders for consumer durables and consumer confidence are both in free fall. The US property market, the very root of the crisis, has yet to hit rock bottom as price declines prevent volumes from stabilising. Seeing the light at the end of the tunnel will depend strongly on the magnitude and effectiveness of the stimulus plans prepared by the governments, which have taken measure of the economic problems based on the related financial difficulties.

The massive and necessary interest rate cuts will not be enough, and given how low interest rates have fallen, monetary policies and fiscal stimulus policies have become inseparable. The plans need to be coordinated and the enhancement of the European Union continued in its current configuration. The policies being implemented will not prevent a global recession in 2009, with the United States and Europe recording a decline in GDP of 2.4% and 2.0%, respectively.