Japan, France and Germany have managed to free themselves from the grip of recession.

There has been speculation that the United Kingdom will lag behind. But it now seems clear that confidence is returning here in Britain as well.

The dramatic summer rally in the FTSE suggests that confidence is returning in the markets.

There are bound to be peaks and troughs in the weeks to come, and it is certainly too soon to say the recession is over.

But with share prices picking up, it does look as if Britain is on the right track.

At some point, there will have to be a post mortem to look at how the UK handled itself during the worst economic crisis in living memory.

Why did Britain push so hard for a world-wide economic stimulus package, otherwise known as borrowing and spending, when countries which rejected the plan seem to have come out of recession before us?

Even if economic growth resumes, the difficulties caused by the recession will not vanish immediately.

Unemployment has been drifting inexorably upwards, and that steady rise will probably continue for many months to come.

It is conceivable that employers will continue to freeze or cut wages, as well as shedding staff.

Indeed, for some people the worst may in fact be yet to come.

One of the dangers in the current situation is that the City and the financial sector is seen to be doing well while other parts of society are still suffering the symptoms of a global meltdown in the financial markets.

There should be no doubt that we want the banking and finance sector to succeed.

But events of the past 12 months have created a dangerous situation, in which banks survive even if they make foolish decisions or take risks which don’t pay off.

It’s tempting to talk about greed. However, every business seeks to make a profit.

The difference is that most firms which take a gamble know that they have to live with the consequences – whether that means large profits or devastating losses.

And this generally prevents them from gambling more than they can afford.

Banks, however, have learned that the taxpayer will pick up the tab for their mistakes.

This needs to be changed. If banks need reforming it shouldn’t be about limiting profits when they succeed, but ensuring they and their directors feel the pain when they fail.