Treasury Today Country Profiles in association with Citi
treasurytoday Magazine May 2009 cover Buy print copy button

May 2009

Previous editions


Question Answered
Faster Payments Scheme
e-treasury & Treasury Technology
Market View
Global market overview – May 2009
Cash Management
Electronic invoicing
Treasury Management
Treasury and tax
Risk Management
Revisiting risk
The Bank Interview
Bank Interview: 
Rajesh Mehta, Citi
Best Practice Preview
Managing the Financial Supply Chain
The Corporate View
Corporate View: 
Maciej Müldner, Skanska Poland
Finance A-Z
FAS 157
Calculator Corner
Net profit margin


Green shoots

When Shriti Vadera, economic adviser to UK prime minister Gordon Brown, spoke of seeing “a few green shoots” in January, her comments were widely criticised as premature. However, the sentiment has been echoed by other, more prominent, figures in recent weeks: US president Barack Obama has claimed “we are beginning to see glimmers of hope,” while Ben Bernanke, chairman of the Fed, has spoken of “tentative signs that the sharp decline in economic activity may be slowing”. With the onset of spring, a note of optimism seems to be creeping into economic forecasts, despite continuing reports of a more gloomy nature.

So what are these green shoots? They are anything from better-than-expected first quarter bank profits to reported increases in mortgage lending – in short, any news that can be interpreted as a positive economic indicator, a sign that the worst is over and that economic conditions are beginning to improve. However, the spring-time analogy invoked by the phrase ‘green shoots’ is misleading. Spring is inevitable: it arrives each year without fail. There are no such guarantees when it comes to economic recovery. Japan’s ‘lost decade’ stands as an important reminder of this.

The recent economic boom is unlikely to return at the first signs of recovery. The extent of the financial crisis and the global downturn is such that people will not want to – or indeed be able to – resume borrowing at the same unsustainable levels we have seen in recent years anytime soon. Even if the optimists are right, and recovery is already on its way, we should be prepared for the green shoots to take some time to grow into anything substantial.

Nevertheless, belief in economic recovery is of course a crucial factor in its realisation – a self-fulfilling prophecy. If people believe that recovery is imminent they may borrow and spend more, boosting the economy and helping to expedite the improvements they already expect. It may therefore be more productive to focus on the green shoots than to follow the example of more cautious commentators, such as Peer Steinbrück, Germany’s finance minister, who recently stated that the “downwards dynamic is not letting up”.

On the other hand, it may also be worth recalling a quote by British playwright Oscar Wilde: “The basis of optimism is sheer terror.”