IMF warns western economies teetering on the brink of another recession

September 21, 2011 – LONDON – Bad policy decisions could condemn the US to a “lost decade”, tip America and the eurozone back into recession, and lead to “stagnation” in the world’s major economies, the International Monetary Fund (IMF) has warned. Cutting its global forecasts sharply, the world’s economic watchdog said the global economy had entered a “dangerous new phase” and urged policymakers to tread a careful line between aggressive deficit reduction and growth. Central banks should stand ready to restart the printing presses to aid the recovery, it added in its twice-yearly World Economic Outlook. “The recovery has weakened considerably. Strong policies are needed to improve the outlook and reduce the risks,” Olivier Blanchard, the IMF’s chief economist, said. “Markets have clearly become more skeptical about the ability of many countries to stabilize their public debt. Fear of the unknown is high.” The warning came as Portugal’s Prime Minister Pedro Passos Coelho said his country may need fresh aid if Greek defaults. “In the case of a default of Greece, this aid could be necessary and it is important that our partners are convinced that it is worth helping Portugal, and in this case, Ireland, too,” he said. Weaker than expected growth in the US, the persistence of Europe’s “sovereign debt and banking sector problems”, high oil prices and the Japanese tsunami conspired to dramatically worsen the outlook since June. Global growth for this year has been revised down from 4.5pc to 4pc in the past three months – led by a one percentage point downward revision in US growth for this year to 1.5pc. Weaker than expected growth in the US, the persistence of Europe’s “sovereign debt and banking sector problems”, high oil prices and the Japanese tsunami conspired to dramatically worsen the outlook since June. Global growth for this year has been revised down from 4.5pc to 4pc in the past three months – led by a one percentage point downward revision in US growth for this year to 1.5pc. –Telegraph

Debt risks increasing, Dow tumbles -288 points: The European Systemic Risk Board, Europe’s risk watchdog, said threats to the financial system have increased “considerably” as the region’s sovereign debt crisis weakens economic growth and pressures banks. Intesa Sanpaolo SpA, Mediobanca SpA and two other Italian banks had their credit ratings lowered by S&P after the company downgraded Italy’s government debt on Sept. 19 for the first time in five years. –Bloomberg   – September 21, 2011