In the advanced economies, the first months of 2011 seemed to offer the beginnings of a self-sustaining recovery, a promise that turned out to be a false dawn. The pattern appears to be repeating itself in 2012, with early signs of strength gradually fading. The same set of hindrances has been at work in the past two years. The crisis exposed the weak foundations of government finances. With budgets in disarray, fiscal authorities have been forced to make deep budget cuts at the same time as other sectors of the economy continue to deleverage. In the euro area, the evolution of fiscal strains into a sovereign debt crisis has severely undermined the confidence of investors and consumers inside and outside the monetary union. Losses on sovereign bonds have led many banks to cut lending, thereby further weakening the recovery. Meanwhile, many emerging market economies have begun to see their previously vigorous rates of economic activity drop off.