The world economy is facing into a period of considerable uncertainty and risk. Already, economies responsible for more than a third of the world's output are in recession, including much of Asia and Russia, are effected. Now, a number of Latin American economies are facing serious instability and volatile financial markets reflect fears that the US and European economies cannot escape unscathed.
The problems are serious and widespread. Many of the smaller Asian economies are still suffering the after-shocks of the period of currency instability and capital flight which has hit the region over the past year. Japan is in the middle of its deepest recession of modern times, with no quick recovery in prospect. The Russian economy appears destined for further instability. And major Latin American economies, including Brazil, have faced serious financial instability in recent weeks and are threatened with wholesale capital flight. The ripples of the crisis have also spread to the US and Europe through a number of channels.
The most prominent impact has been on the financial markets, where investor confidence has led to significant falls in share prices in very volatile trading. If the US market falls much further, the impact on the world's largest economy could be severe. Meanwhile Britain teeters on the brink of recession and the economies of Central and Eastern Europe have felt some speculative pressures.
International policy-makers must wonder how much worse it can get. They will realise that the US and European economies must continue to grow to counterbalance the slump in Asia. They will also be assessing the channels through which the crisis can spread, principally through stock market turbulence or through the impact on the international financial system, where heavy losses sustained by banks in many markets could limit their ability to lend on funds and thus lead to a kind of international credit squeeze. And privately they will be concerned about the worst-case scenario of turmoil emerging in Latin America, a collapsing US stock market, a lengthy economic collapse in Russia and even a collapse in world demand and prices - a period of deflation - forecast by some commentators.
Things may not get quite that bad. But a key problem is that politically the major economies are not well set to deal with these problems, with the Clinton presidency under threat, elections imminent in Germany and the Japanese political system struggling to come to grips with the recession there. Firm action and leadership is needed , particularly in the US, where the President's troubles are one factor unsettling the markets and his administration's failure to date to persuade Congress to give more funds to the International Monetary Fund threatens that organisation's ability to try to head off further problems in Latin America.
In Europe, meanwhile, the run up to the launch of the single currency is being overshadowed by these international uncertainties. However, the euro's birth will go ahead and from next January the European Central Bank will be a major player on the international stage and will face the task of maintaining the euro zone on a path of stability and growth. What happens in the weeks ahead will determine just how turbulent a climate will prevail when the new currency is launched. It is a fair bet, however, that come next January the prospects for international growth next year will be, at best, modest and that the turbulence and uncertainty we have seen in recent months will still feature.