will only take place when banks are once again able to be funded and create credit at interest rates much lower than currently available. Therefore the Euro-area major policy challenge will be to calibrate the "asset quality review", stress tests, and new capital requirements making them tough enough to ensure that the exercise is credible, while simultaneously avoiding spooking markets.China will also face the challenge of appropriately calibrating the implementation of itsstructural reform package. Higher penetration of non-state firms in several sectors, including the banking system, will require some slackening of regulation and phasing out interest-rate controls. Prior to that, however, the central government will need to rein in subnational finance and the "shadow banking" through which local governments have splurged on infrastructure and real estate spending in the last few years. Results from a public debt audit were released last month, showing that the debt of localities had risen 67 percent from the end of 2010 to June 2013. In that context, another important consideration when looking ahead is to remember the interbank market turmoil of December, which only ended when the Central Bank of China conceded to providing liquidity. This illustrated that authorities will have to step cautiously -- a stone at a time -- to cross the transition river, if an economic growth collapse is to be avoided.Meanwhile, tax policy will be a key policy challenge in the case of Japan. Aggressive fiscal and monetary stimuli implemented during Prime Minister Abe's government have jolted Japan's economy out of its deflationary lethargy. However, Japan's public debt has climbed to levels around 250 percent of GDP. As part of the solution, the consumption tax will be hiked to 8 percent from 5 percent in April. There is also a scheduled decision in next November on whether to additionally increase it to 10 percent as of October 2015. It will be crucial that such a higher tax burden does not countervail the overall anti-deflationary direction of macroeconomic policy.Finally, there is the case of emerging economies coping with the actual unwinding of QE.Last summer -- in between Ben Bernanke's testimony to the US Congress in May, when he alluded to the eventual unwinding of the currently third round of QE, and the Fed meeting in September postponing its beginning -- the so-called "fragile five" (Brazil, India, Turkey, Indonesia, and South Africa) underwent massive capital outflows and large currency depreciation. Some analysts referred to that turmoil as a potential revival of the emerging-market crises of the 1990s. Those countries shared in common the presence of large, liquid, and integrated financial systems, as well as current-account deficits associated with substantial capital inflows and currency appreciation since the beginning of the US "unconventional monetary policies."Now that the unwinding is really starting, the baseline scenario is not one of a repetition of the turbulence, since changes in asset values, exchange rates, and investors' positions have not reverted. The unwinding is to some degree already priced in. On the other hand, four of the "fragile five" (Brazil, India, Turkey, and Indonesia) will have major elections in 2014. As