THE WORLD BANK Ascent After Decline: Challenges of Growth

A sharp cleavage has become evident between the prospects and challenges facing advanced economies and those facing emerging and developing economies. Attention in the ad-vanced economies has focused on the financial sector, where the global crisis originated, and on government balance sheets, which have been affected by the economic downturn, bailout costs, and the need for massive fiscal stimulus. At the same time, to avert another Great Depression, monetary policy has been pressed into service in an unprecedented manner—from a coordinated cut in policy interest rates in October 2008 to op-erations aimed at increasing liquidity in the nonfinancial cor-porate sector and rounds of quantitative easing (QE) in ad-vanced economies. The euro area faces serious difficulty from its dependence upon bank credit and a sovereign debt problem in vulnerable euro area countries that has compounded the problems of banks holding government securities. These problems began with the bailout of Greece in April 2010 and spread to Ireland, Portugal, and Spain, despite the creation of a €750 billion stabi-lization fund and substantial purchases of government bond