Europe’s economy poses threat to global recovery

July 8, 2010 at 9:00 am Leave a comment

According to the International Monetary Fund, Europe’s weakened economy poses a great threat to global recovery, as its countries struggle with heavy debt, banks face a reckoning over their lack of capital and growth is slowing. The IMF made an assessment of the world economy after the beginning of the debt crisis.

The IMF underlined the steady growth in USA and in the emerging economies (Latin America and Asia) and stated that the overall forecast for global growth to 4,6 percent for the year, from 4,2 percent. This is due to a stronger than expected performance particularly in Asia.

The overall expected growth for Europe was reduced due to governement spending cuts, concern over national debt and a growing uncertainty about the banking sector. The IMF noted that the European countries will refinance government bonds and Europe, in conjunction with the IMF, established a fund to guarantee the repayment of government debt in the euro zone.

The issues of government debt and the health of the banks are related: European banks own tens of billions of dollars in Greek, Spanish and other government bonds, and the stress tests will assess how those holdings affect each company’s overall financial health.

The IMf reduced the estimated growth for Spain for 2011 with 30 percent. In April, the IMF established an estimated growth of 0,9% in 2011, but reduced it to 0,6%.

Source: The Washington Post

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Entry filed under: Everyday things, News, Real estate. Tags: , , , , , .

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