The financial crisis, in a way, is a reflection of the imbalance between the growth of real and financial sectors. Easy availability of housing loan led to unprecedented levels of debt, three times the GDP in the US and Europe. Repayment defaults due to bubble burst added illiquidity and caused bankruptcy and closure of banks and financial institutions. The crisis is estimated to have wiped out about one-third of the value of world’s companies, and millions of employees lost their jobs or were pushed to extreme poverty. Measures to overcome the slowdown included stimulus packages of about ten trillion US$ for banks and guarantees to depositors; and also enhanced public spending. The downfall has stopped with a ‘V’ shape recovery. Is the short-term recovery sustainable?

Keywords : Financial crisis, Measures to overcome slowdown, recovery