Europe's dithering on debt threatens to power up the financial doomsday machine again

A renewed sense of panic has returned to markets. Only recently, Western policy-makers had declared a depression averted, an outcome they modestly attributed to their own actions in unleashing an unprecedented programme of co-ordinated financial system intervention, fiscal stimulus and monetary easing. The banking system seemed to be healing itself and for many countries, the wider economy was returning to growth.

But now the financial doomsday machine, so recently declared deactivated, shows every sign of starting up again. Are we about to move on to a second, possibly more damaging, phase of the financial crisis that will tip us back into prolonged recession? And if so, what can be done to prevent it? Read more...