Sovereign risk was a principal theme in 2011 â?? most visibly in Europe and, to a lesser extent, in Americaâ??s loss of its triple A rating. Along with poor growth and rising inequality, it will continue to raise serious questions next year about the functioning of the global economy. As this occurs, one institution â?? the International Monetary Fund â?? will attract special attention. The key question is whether it can finally step up to the role of global conductor, rather than suffering yet more erosion of its credibility.
The sovereign risk crisis has not been kind to the IMF, especially when it comes to Europe.
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