Recovery rules out depression a year after Lehman

By Brian Love and Emily Kaiser

PARIS/WASHINGTON (Reuters) - Fears of a new Great Depression, all too real after Lehman Brothers collapsed a year ago, have abated as the global economy emerges from the depths of recession with the help of massive government intervention.

Nothing so dire has materialised and forecasters believe the economy is already growing once again after a recession that may well enter the record books as the worst since the depression of 1929-33, but a very distant second.

Cross-border trade is showing renewed signs of life, regular business surveys have been suggesting stabilisation since March, triggering a sharp rise in stock markets, and now forecasters such as the OECD are saying the downturn is coming to an end.

Marc Touati, economics research chief at Global Equities, a French financial services brokerage, says fears of a 1929 rerun, like swine flu, will soon join SARS and the Y2K computer bug in the annals of economic calamities that never materialised.

There is a big catch though. The economy is recovering thanks to trillions of dollars of central bank and government intervention and remains dependent on that public life support.

The next challenge will be when and how fast to remove the fiscal and monetary stimulus that broke its fall, and doing so without causing a relapse or stoking excessive inflation.

"Right now the recession doesn't feel so bad," said Deutsche Bank's chief European economist, Thomas Mayer. "But the day of reckoning is still ahead."

Finance ministers from the world's largest economies agreed on September 5 that now was no time to withdraw stimulus amounting to the equivalent of two percent of global GDP this year and 1.6 percent in 2010, according to IMF estimates. For G20 statement, click on and stimulus factbox