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In spite of fresh hopes brought on by the newly proposed Euro fund, the International Monetary Fund recently issued a fresh warning about the dangers posed by over-delay, urging Eurozone leaders to act with more urgency in response to the debt crisis in the two most affected countries – Greece and Spain.
The IMF pointed out that the situation was indeed very serious and could actually degenerate into a global economic crisis unless national leaders work together to reach a long-lasting deal. With new steps being taken by the Eurozone finance ministers as they met in Luxembourg for a crisis talk, and the formal launch of the permanent rescue fund, the IMF has further called on Europe as a whole, and the United States, to make growth their priority in order to help the BRIC economies, but without the R – Russia.
IMF issued this warning at the start of its annual meeting in Tokyo. The body also pointed out that the downside risks are judged to be more elevated than portrayed in April 2012 and September 2011 world economic outlook reports.
But several analysts are asking what exactly IMF has seen that the rest of us apparently have not. Basically, the slowing GDP growth across several developed countries, and even majority of the developing countries,is one major indication of a bleak future. The situation appears even more desperate when one considersaccompanying declines in international trade around the world.
Things became much gloomier when the World Bank announced warnings of cuts in growth across the developing world. This news had an immediate effect on the stock market;the FTSE finished the day at 5845, down 26 points, while continental stock markets also fell.
Germany, which is practically the last giant standing in Europe, recently began losing much of its manufacturing vitality. And the dilly dally in Spain about whether the country needs bailout or not is also causing tension in the market as people are becoming increasingly impatient with the waiting game.
The German finance minister, Wolfgang Schaeuble, said Madrid had made it very clear that it wanted no help. “Spain needs no aid programme. Spain is doing everything necessary, in fiscal policy, in structural reforms,” he said as he arrived at the launch of the European Stability Mechanism in Luxembourg, which will eventually have €500bn (£405bn) at its disposal.
Unfortunately, the Eurozone crisis is not limited in its effects to Spain and Greece; even the UK is expected to continue with its unconventional austerity measures into the year 2018, and the country is also expected to suffer a 0.4 reduction in national income this year.
The United States as well is not spared from the crisis. Several analysts have even pointed out that the country’s fiscal problems may have in fact added to the Euro crisis, and posed a significant threat to its own economy as well.
