The Bank for International Settlements released its annualreport yesterday, enumerating a litany of concerns about the globaleconomic outlook. Reflecting on the most recent deceleration, theBIS wrote “the economic momentum in advanced economies [has been]too weak to generate a robust, self-sustaining recovery.”

Among the advanced economies, Europe is in the most challengingposition. Although recession has not been declared formally, theevidence of contraction is clear enough. European leaders will meetbeginning this Thursday in Brussels and are expected to grappleover stimulus measures. The anchor economies remain at odds overhow to proceed, with Germany appearing increasingly isolated in itsresistance to more flexible crisis-response measures. If France andItaly do not persuade Germany, the perceived failure of the summitmay trigger a new wave of volatility in financial markets.

Navigating the recovery’s domestic fault lines, the FederalReserve committed last week to continuing the maturity extensionprogram otherwise set to expire at the end of June. Over thenext six months, the Fed will adjust the composition of its balancesheet, exchanging $267 billion in short-term securities forlonger-term bonds.