Dogged by fiscal "episodic uncertainty," the euro area and the U.S. face "persistent tail risks that could derail the gradually improving economic outlook," writes Citi's chief economist Willem Buiter. "But, the most likely outcome in both the US and euro area is that policymakers will do enough to avert a crisis, even if this involves further 'kicking the can down the road.'"
As for China, Citi continues to see "major concerns about the medium-term sustainability" of growth despite the country's Q3 rebound.
"More broadly, although delayed Fed tapering may provide supportive near term liquidity conditions, we continue to see downside risks to growth in a wide range of other EM countries, amidst sluggish world trade growth, plus the buildup of EM imbalances (fiscal, current account, private debt)," he wrote.
In the report, Buiter's team breaks down what's happening in each