Sovereign risk was a principal theme in 2011 – most visibly in Europe and, to a lesser extent, in America’s loss of its triple A rating. Along with poor growth and rising inequality, it will continue to raise serious questions next year about the functioning of the global economy. As this occurs, one institution – the International Monetary Fund – will attract special attention. The key question is whether it can finally step up to the role of global conductor, rather than suffering yet more erosion of its credibility.

The sovereign risk crisis has not been kind to the IMF, especially when it comes to Europe. There is no denying that too many of the adjustment programmes it has overseen have fallen short of their objectives. Whether it jumped or was pushed, the institution sacrificed some of its own rules, including those previously deemed sacrosanct.

For two years, the IMF agreed to a series of programmes that were partially designed, inadequately funded and, in some cases, even threatened its preferred creditor status. In each case, the IMF ended up supporting a weak attempt to muddle through, rather than a plan sustainable in the medium term.