What could go wrong?

The ability of governments to respond to future shocks is at “critically low levels” after the battering of the credit crisis, according to a report from the World Economic Forum (WEF), the organiser of the Davos summit of political and business leaders. Its annual risk assessment gives warning that the unprecedented peacetime debts racked up by governments as they fought to restore growth have left the global economy in a precarious position.

A sudden drop in asset prices, a sovereign-debt default, or currency swings could therefore have disastrous consequences, it says. Its warnings come as the World Bank this morning releases new forecasts predicting a return to economic growth levels that would have been expected without the financial crisis, but with the recovery in the most developed nations still only “tentative”.