A telling moment amid the mounting economic uncertainty was the sight of the US joining China in calling on debt-stricken Europe to put its house in order. It is not long, after all, since the US bore the brunt of Beijing's concerns and criticism. Continuing fears of a double-dip global recession have switched attention to Europe, as the euro zone struggles to tackle a sovereign debt crisis that could destabilise its banking system. If Europe were to slip back into recession it would push the stalled US economy in that direction. The risk of the US and Europe slipping back into negative growth is higher than at any time since the recovery from the global economic crisis. The question for Asia is how badly it would be affected? According to a regional review by the International Monetary Fund to be published soon, a recession of one or two percentage points in the US and Europe would have knock-on trade and financial effects that would slash Asian growth by a third. The IMF also warns that the world cannot look to China in the same way as it did during the economic crisis to lead a recovery, as another round of stimulus measures from Beijing would not be as effective. The outcome of the euro crisis will therefore shape the global economic outlook. Markets have swung wildly, reassured one minute by promises of action by world leaders and the IMF, fearful the next of prospects for world growth next year without concrete measures to back up the words. The immediate test is management by the euro zone of an inevitable default by Greece to prevent contagion in banks that hold its debt. Investors have responded positively to reports that a reformed Euro440 billion-euro bailout mechanism - the European Financial Stability Facility - could now be boosted to Euro2 trillion or more to protect the most vulnerable countries. But that is easier said than done when it comes to consensus among 17 European governments, because of lack of cash to contribute or political support. Germany in particular has misgivings about risking savings to prop up less prudent euro zone members. European leaders have six weeks before the next G20 summit to come up with a solution that calms financial markets. Meanwhile, in Hong Kong, continuing uncertainty will bear on sentiment, including in the property market and in the tone of next month's policy speech. The outcome will shape economic priorities and the government agenda. With its heavy exposure to external economic forces, our city is fortunate again to have deep reserves with which to cushion business, employment and the poor against economic winds. But the crisis is a reminder of the need to deepen and diversify development of our financial and services economy to reinforce its resilience.