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

Now, we have upgraded the forecast because just mathematically that boost to growth will knock through into next year. But actually, when you look at what's going on from a more structural perspective, there isn't a lot happening which gives us confidence that the economy is going to feel particularly buoyant over the course of the next year or so. The restocking is good, but is likely to be transitory once warehouses are full. That particular boost growth is going to ebb away. A lot of the rest of growth in America is still coming from policy. Policy is very stimulatory both fiscal policy and of course monetary policy too.

But if you look at what's going on with private sector demand, it's much harder to see any kind of structural uptick that firms restocking, a bit of policy support, but we still see very, very high levels of indebtedness particularly for consumers and that's going to hold them back.

So actually, while growth next year will undoubtedly be a little bit stronger than we thought, we're still thinking that it will be pretty subdued relative to that that we've seen in the past and we actually think there is going to be another slowdown, quite a sharp slowdown actually in 2011, once the policy stimulus really disappears.

So yes, a little bit better, but the longer term story is still rather depressing I'm afraid.

But Germany, a lot weaker than everyone had been hoping and if you look at what's going on there, they're an export powerhouse in an environment where some of the world's biggest markets aren't growing very much. So while they export clearly to Asia and China who are doing quite well, they export a lot to America and America is not really growing that quickly at the moment and they don't have the strength of consumer demand to fall back on because Germany traditionally has been a high savings, low consumer demand sort of economy. So there things look a bit weak.

But I think the action is really, as you say, in these highly indebted economies and Greece perhaps the most interesting one of all. We don't expect to see any of these nightmare scenarios, the euro breaking up or countries being expelled from the eurozone. Nothing like that.

But we do think that we will see financial assistance being extended particularly to Greece, which is the weakest of all of them, very, very tight fiscal policies and a lot of hair-raising moments in financial markets on the way because governments of course don't have the political mandate to impose the kind of fiscal tightening which is going to be needed, so we're going to get there by the skin of our teeth and that's going to mean an awful lot of frightening moments in terms of bond yields, for example, over the course of the next six months until we get to some kind of settlement. And that settlement is going to be government extracting a lot of demand from these economies to get the fiscal situation under control and that spells very weak growth.

But then if you look at the countries on the inside, which ultimately are probably going to have to pick up the tab for keeping them in by extending some credit (say Germany and France), it's not in their interest either to create a situation where financial markets think that exiting the eurozone is a plausible scenario because it undermines the credibility of the broader eurozone. It makes it more expensive for Germany and France to borrow, so they're very keen to keep people like Greece and Portugal and Italy on the inside.

So for Greece, it's in their best interest and it's in the best interest of everyone else, they're going to stay in and of course, it will be painful. You will see very weak growth in Greece and other markets for a long time. You will see the rest of the eurozone effectively passing financial resources across to make it plausible that Greece can stay in. But those are the things that are going to happen. Exit is not really an option.

Italy is a completely different kettle of fish. Italy is one of the world's biggest debtor nations. Very difficult to see that you could get some kind of transfer of resources which would plausibly cover a significant amount of Italian debt, but they're not quite in the same position because their deficit is nothing like as big. They have a lot of debt, but they're not borrowing as much at the moment as Greece is relative to the size of their economy.

And it's also dependent on exactly how it happens. They're looking for ways in which they can extend some kind of backstop without necessarily having to expend large amounts of cash to fund current spending because politically, of course, that would be highly unacceptable. You can already see a lot of protests in Germany, complaints in Germany, about the prospect that they might have to bailout these more profligate countries.

So everyone is searching for some kind of middle way where they can underpin financial markets without necessarily extending a lot of cash directly into these other economies. But ultimately, as you say, it's the wealthier economies. It's the Germanys and the France who are going to have to support these others one way or another. Whether they do it directly or whether they do through it to the auspice of the IMF is slightly unclear right now, but do, they're going to have to.

I mean, that by no means suggests that we're going back to normal where interest rates will be perhaps at the sort of 3, 3.5, 4 per cent level, but we do expect to see interest rates start to creep up a bit late this year and into 2011. Nothing too significant, but I think it is important to remember thee is some concern about how long you can keep this super loose monetary policy in place.

In other countries, we think it will come later. So if you look to the eurozone, we think that nothing is going to happen there before 2011.

But I think the really interesting country is the UK where we think the economy is in such a bad shape that you may actually see the Bank of England need to step back in to do some more quantitative easing. So we might have a bit more loosening to come here before we actually see tightening down the road.

So I think the UK probably looks in the worst position of the major central banks.

Right now, the fiscal strategy which is being talked about by both of the main parties isn't really plausible. But I think most financial investors are prepared to give everyone the benefit of the doubt knowing that it is very difficult to talk about the scale of tightening we're going to need prior to the election.

After the election, we think we will get some kind of muddle through. There will be quite a bit of tightening, more than the population in the UK probably is expecting. That will be just enough to keep markets on side and the economy will be very weak, but we will kind of grind through.

I think if the incoming government dithers though and suggests that it isn't politically strong enough to grasp the mettle and do the things that need to be done, then you will see a big shakeout both in sterling and in the bond markets. But the fear of that alone will probably prompt the incoming government to do what has to be done, but that is going to be very painful and will mean that the UK stays weak for quite a long time we think.

Thank you Robin. Well to get the latest on the world outlook join us next month again for another edition of the Global Forecast. Until then, thank you and goodbye.