For some months speculation about a war in Iraq, followed by nervousness about its outcome, have held back the international economy. Understandably, businesses were loath to commit to major investment projects when faced with such a climate of uncertainty, while consumer confidence was also hit.
Now, the question is whether the end of the war heralds an international upturn. The answer is not clear. The outlook for the US economy remains uncertain, although the end of the war should boost consumer and business confidence. Continental EU economies remain in poor shape, particularly Germany where deflation is a real threat. Meanwhile, the Far East has been hit by the SARS virus, while the Japanese economy remains in trouble.
In the months ahead it is essential that policymakers do all in their power to promote recovery. The agenda they face is imposing and the diplomatic fall-out from the war will not help in some key areas.
In the US, a key responsibility rests on President Bush, whose tax-cutting strategy faces political difficulties. Faced with Congressional opposition to its original plan, the task for the administration is to come forward with a programme which mixes stimulus with a longer-term strategy to control the federal deficit.
The task facing European policymakers is even greater. In Germany, the Schröder government is bringing forward economic reform plans. However there is a long way to go in deciding and - crucially - implementing a strategy.
Meanwhile, it is long past time that the European Central Bank acted to offset the risks facing the euro zone economy. Last December it announced a half point interest rate cut, but it has not reduced rates since then and it is not now clear that it intends to do so. Lower interest rates are required without further delay to promote EU recovery. The risk of a growth slump is now much greater than any inflationary threat.
Finally, there is one area which transcends international boundaries - trade. The Doha round being conducted under the auspices of the World Trade Organisation is in trouble, caught by old disagreements over agriculture and new trans-Atlantic diplomatic tensions. A breakthrough is essential if a key meeting of trade ministers in September is to give some impetus to the round.
Progress will require flexibility on all sides, including a strategy to reduce supports to agriculture. However, if the compromises are not made and the round fails, the damage to already fragile business confidence will take a heavy toll on the longer-term growth outlook.