The Economy's Perilous Waters

Illustration for TIME by Emiliano Ponzi

What a difference a week makes. With their coordinated response to the international banking crisis, European governments — followed by the U.S. — appear to have calmed a worldwide market panic and eased fears of a devastating series of bank collapses. Investors from Tokyo to Tunis immediately sent stock prices shooting up again after a week of historic losses. But it's still far too early to celebrate. The measures need to prove their effectiveness by unfreezing lending. And there's still the huge challenge — no less urgent than fixing the banking system — of preventing an economic...

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