Skip to comments.IMF sees 'alarmingly high' risk of fresh global slump
Posted on 10/08/2012 10:23:21 PM PDT by bruinbirdman
The International Monetary Fund has slashed its growth forecast for large parts of the world economy and warned of a full-blown global slump if policymakers in Europe or the US mishandle serious threats.
Risks for recession in the advanced economies are alarmingly high, said the Funds latest World Economic Outlook. The intensity of the euro area crisis has not abated as assumed in previous projections.
Spains economy is expected to contract by 1.5pc this year and 1.3pc next as austerity bites, pushing public debt to 97pc of GDP in 2013. The estimate was 84pc as recently as April, showing how quickly the debt dynamics have gone horribly wrong.
Italy will shrink by 2.3pc this year and 0.7pc next, pushing the debt ratio to an all-time high of 128pc. The report said fiscal austerity in Europe was doing more damage than expected .
The Fund said weakness is spreading from the periphery to the whole of the euro area, with even Germany buckling. The eurozone will shrink at a 0.7pc rate in the second half of this year before eking out growth of 0.2pc in 2013, but only if Europe delivers on a string of promises made over recent months.
Failure to act in time could lead to a full-blown crash, with contraction near 7pc next year in Southern Europe and a deep recession in the North. The IMF said Europe must stand behind a summit pledge in June to allow the European Stability Mechanism or bail-out fund to recapitalise crippled banks in Spain and other EMU states directly. This is deemed critical to help break the adverse feedback loops between sovereigns and banks. The AAA bloc of Germany, Finland, Holland, and Austria have reneged on the deal.
The Fund said the confidence boost from the ECB's
(Excerpt) Read more at telegraph.co.uk ...
Its okay were printing out loads of fed reserve notes — surely some of that will find its way to the Euro-Zone and happy days are here again. /s
That's where most of QE1 went.