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European debt crisis could flare up again: IMF

Washington, Wed, 18 Apr 2012 ANI

Washington, Apr 18 (ANI): The International Monetary Fund has warned that the European debt crisis might flare up again at any time and send the global economy back into deep recession.

The Fund's Chief Economist, Olivier Blanchard, claimed that there was currently 'an uneasy calm' following tensions in financial markets at the end of 2011, the Gaurdian reports.

Referring to the risks that the country might leave the Euro, Blanchard said that they are 'doing everything possible that this does not happen.'

Blanchard reasoned that there would be contagion risks if one country departed from the single currency, and said this would be one of the circumstances in which the firewalls would be needed that would affect the sovereign bonds of other nations, he said.

Addressing the press conference to mark the publication of the IMF's flagship, World Economic Outlook, Blanchard said, "Strong policy measures were taken, new governments came to power in Italy and Spain, the European Union adopted a tough fiscal pact, and the European Central Bank injected badly needed liquidity. Things have quieted down since, but an uneasy calm remains. At any time, things could get bad again."

Global growth has been predicted to drop from 3.9% in 2011 to 3.5% but would rise to 4.1% in 2013. The Fund fears that there would be a more pronounced drop in global growth as a result of the debt crisis in the eurozone.

Noting that Britain's financial sector had been hard hit by the financial crisis, the Fund said activity would be weak in early 2012 before recovering, while in Europe, activity will continue to disappoint in the advanced economies, expanding by only about 1.5% in 2012 and by 2% in 2013.

The Fund also revealed that job creation in economies in these economies will likely remain sluggish, and the 'unemployed will need further income support and help with skills, retraining, and job searching.' (ANI)


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