It’s the spring of 2009 and finance ministers from the G7 are once again gathered in Washington for the half-yearly meeting of the International Monetary Fund. Policymakers are feeling good. After a grim 2008, the economic skies are clearing. Growth has started to pick up; real estate prices have stabilised; financial markets sense better times ahead.

A year earlier the IMF described the crisis that erupted in August 2007 as the most profound shock to the global financial system since the Great Depression. Fortunately, however, the economic fallout from the losses made on sub-prime mortgage loans proved to be far less severe than the slump of the 1930s. There are sighs of relief all round at disaster narrowly averted.

This is by no means an implausible scenario. Indeed, it is the sort of outcome that the IMF and the G7 expect: a short-lived recession in the US; a period of sluggish sub-par growth for other developed countries; a modest slowdown in the performance of the developing countries.The reason for this confidence is that the policy response to the crisis will prove more effective than the botched handling of the Wall Street crash of 1929. Learning the lessons from history, central banks have cut interest rates and pumped cash into the banking system to keep it afloat. In the US, an easing of monetary policy will shortly be accompanied by a $150bn tax cut.

Some economists — including the former US treasury secretary Larry Summers — believe that the bail-out of Bear Stearns last month will prove to be a cathartic moment. Once the Federal Reserve made it clear that it was prepared to do whatever it took to prevent leading Wall Street institutions from collapsing, sentiment started to improve, even though the changing mood was hard to detect at first.Should Summers be proved right, there is indeed a possibility of a relatively soft landing for the global economy. The return of a modicum of stability to credit markets will be followed by a pick-up in activity as the pro-growth policy markets start to feed through into stronger consumer and business confidence.

There are problems with this thesis, however. The first is that it is far too early to say that the worst is over, and none of the crop of policymakers in Washington this weekend was brave enough to say as much. Henry Paulson, who does Summers’s old job at the US treasury, went the closest when he said he expected to see some impact from lower interest rates and tax cuts by the third quarter of this year. But that depends on the US housing market stabilising.

One encouraging message from the past week has been the G7’s rather dusty response to the plea from banks that they should not have to pay for their recent behaviour by tighter curbs on their activities. One of those who heard the bankers explaining why they should continue to receive financial support from the state without giving anything in return noted: “I wish my taxpayers had been listening.”

The banks have lost the plot. With credit harder to come by and more expensive, finance ministers would be mad to side with the banks against the voters that elect them. A deeper recession than the Fund is expecting would be painful but there is a silver lining: profound crises are not quickly forgotten and those responsible for them not easily forgiven. — The Guardian