There are tantalizing signs of good news in the world economy. In America firms are hiring more and consumers are spending more. The euro zone’s recession is proving milder than expected. Greece’s debt restructuring, the first sovereign default in a developed economy for 60 years, has passed off without a hitch. Cheered by the signs of recovery, and relieved that disaster has been avoided (particularly in Europe, which towards the end of last year seemed on the brink of a calamity of Lehman-like magnitude), financial markets have been climbing steadily higher.

After so much gloom, it is hardly surprising that the world’s animal spirits are beginning to leap again. Yet there are good reasons to be wary of all the optimism. Global growth, dragged down by less ebullient emerging economies as well as recession in Europe, is still likely to be slower this year than it was in 2011.

And there are still big risks out there. Too often since the 2008 financial crisis investors’ hopes for strong and lasting growth have been dashed—whether by bad luck (soaring oil prices), bad policy (too much budget austerity too fast) or the painful realization that recoveries after asset busts are generally weak and fragile. If tensions with Iran over its nuclear programme spike, for instance, an oil-supply shock could once more cause havoc. Much could yet go wrong.

European countries need to stop focusing so intently on austerity and instead do more to generate growth. The ECB’s liquidity injections have successfully bought time for indebted governments, but for permanent relief the euro zone needs to build institutions that allow joint liability for government debts balanced with fiscal discipline.

America’s priority should be to craft a medium-term plan which puts the budget deficit on a downward path without snuffing out the recovery. There is, unfortunately, not a chance that it will do that before November’s presidential election. China’s economy remains too reliant on investment rather than domestic consumption. Rather than encourage the building of roads and railways, any stimulus this year should push cheap housing and higher wages, as well as pensions and health spending.

The reasons for optimism are real. But if policymakers get it wrong again, the recovery could yet again turn to dust.