Hello and welcome to the Global Forecast from the Economist Intelligence Unit. My name is Tony McMahon and as ever I'm joined by Robin Bew.

In terms of unemployment, as you say, unemployment has not risen perhaps quite as much as people have thought. We've been quite impressed by some of the policies that European governments have put in place to try and keep unemployment down. So they've subsidised jobs, tried to go to part time working. Those things have been successful in putting a cap on unemployment, but unfortunately, they're very expensive. They also ossify the labour market because what it means is that you keep everyone trapped in jobs, potentially in industries that actually need to restructure or change. In Germany's case, actually, often export-orientated industries. So our worry is, in the long-term, this is actually not good for these economies. It's good for the short-term, it doesn't help in the long-term and we probably will need to see higher unemployment going forwards because we do need to see that churning in the labour market. So I suspect there's going to be more pain to come.

But the other thing that you're likely to see is a lot of the burden dropping on the informal labour market. So one of the things that's very common in Europe is that there is a kind of protected inner core of labour that doesn't get shed in a downturn and who have a lot of workers rights and then there's temporary and part time labour that gets squeezed very hard. I think that squeezing process in that cohort of the labour market is going to go on very aggressively, but there will be strains in the main part of the labour market as well and you will see a lot of pressure for either lower pay increases or unemployment will have to creep up.

What's going to happen going forwards? Well, I guess there is one of two things that could happen. Ultimately, you're going to see in the US - particularly because that's the currency, the dollar is the currency which is funding a lot of this - you're going to see the US start to raise interest rates and some of this could reverse. Hopefully, gently, but potentially, spectacularly. So you could see a bursting of bubbles in some markets.

Of course the other thing that you could see happening is actually policy stays loose for much longer than people are expecting. Remember in Japan, constantly through the 1990s we saw the central bank try to tighten policy and many commentators thinking that policy would quite quickly move back to a more normal setting. It never did. It funded a lot of bubbles in other bits of the world because of the carry trade. You could see that happening in America too and allowing bubbles to continue to inflate actually for quite a long time and of course that's a worry because we know from this crisis that big bubbles can be very painful when they burst. I think Asia is a place you have to look for those bubbles inflating because that's where everyone feels optimistic.

But it's absolutely true that the BRIC economies, and other emerging economies, will grow as they have done in the past much more quickly than the rich world. And indeed, I think the growth gap is going to be bigger going forwards because of course in the last decade, America and Europe have been experiencing much higher rates of growth than we've generally assumed will be sustainable because of this credit funded boom that we've had. Going forwards, of course, that won't be the case. You're going to see Europe and the US growing perhaps by a couple of percentage points a year whereas places like China are still going to be doing 8 or 9 per cent growth. Brazil probably 4, maybe even 5 per cent if they're a bit lucky. Russia has some unique problems of its own, but given it is an energy economy and we think oil demand will gradually rise as China continues to develop, they'll grow more quickly and India is doing very well.

So the growth gap is going to increase and that inevitably means of course that those economies will gradually become a bigger and bigger chunk of the world economy. Most of the businesses that we work with who are very international in outlook are positioning themselves for that. They already have a lot of investments in those emerging market economies. But the story that they're propagating right now is that they want to put even more assets into those economies, perhaps even at the price of their exposure to the rich world. So we are seeing some businesses talk about running down their exposure in America and Europe to support bigger engagement in places like India and China because they see that's where all the opportunities are and I think they're probably right in that.

But I think the difficulty for Obama is less about the immediate response to the recession because pumping a lot of stimulus a bit politically contentious particularly around the deficit, but actually not that hard. I think for Obama the difficult thing is these longer-term structural policies such as healthcare, such as climate change where he's clearly struggling to get a settlement that's going to deliver the things that he wants. If you look to healthcare, for example, which is an important long run economic issue as well as a fiscal issue, and I think the problem there is that the issues are very divisive. He, by nature, is a consensus politician. These aren't necessarily consensus issues and I can see that if he thinks the last year has been difficult, I suspect the next few years are going to be equally hard and possibly even harder.