The recovery from the trough of the recession varies greatly among the advanced Western economies. The UK has grown 9.1% convincingly better than the Eurozone where individual countries are still flirting with recession and/or deflation and the Eurozone economy overall is only 3.4% above the level at the trough and still 2% below the pre-recession level in 2007, but the US economy has performed strikingly better and has risen 14.7% from the trough. Unsurprisingly, the Chancellor welcomed the emergence from depression as a "major milestone" and an endorsement/justification of the government's overriding objective of fiscal consolidation.
Fortunately, such conservative sentiments were not evident when the financial crisis struck in 2008. A key turning point occurred on 10 October 2008 when the G7 Finance Ministers, during a meeting of the IMF and World Bank, decided to "use all available tools to support systematically important financial institutions and prevent their failure." Crucially, this represented the turning point in the crisis, but their actions implied a quite unrelated volte face: the era of financial liberalisation was over: the Holy Grail of a robust self-regulating market, self-correcting integrated self-equilibrating system was shattered. Like the Holy Grail it had always previously been impossible to prove that such an idyll did not exist, at least until this revelation. The equivalent value of the undertakings given was unprecedented: 18% of Eurozone GDP, 73% of US GDP and 74% of UK GDP, and 25% of world GDP taken altogether. The support raised the fiscal deficit in 2007 in the US from 7% to 13% in 2009, in the UK from 3% to 11% and in Japan from 2% to 10%. These fiscal deficits were equivalent to those previously experienced only in wars. For the UK the rise in public debt relative to GDP was the fourth largest in history, exceeded only in the Napoleonic and the First and Second World Wars.