World Bank president Robert Zoellick indicated that risks to the global economy are intensifying, with the euro region’s outlook dependent on European leaders making the right decisions.
The global economy is unlikely to fall back into recession but there are risks, World Bank (WB) president Robert Zoellick told reporters on Tuesday in Singapore, CNBC informs. Zoellick’s comments come just days after official figures showed no jobs were created in the United States in August, the worst result since September last year, compounding an already downbeat outlook. “I don’t believe that the United States or the world will go into a double-dip but there’s high degrees of uncertainty,” Zoellick said. The United States is more likely to go through a period of slow growth with ongoing high unemployment, he added. His comments come after Singapore Finance Minister Tharman Shanmugaratnam, who also chairs a key International Monetary Fund committee, said the world is “more likely than not” to see a recession as growth in both the United States and Europe have fallen to “stall” speed. On Europe, the WB president said Europe Union had to consider working closer in the area of fiscal policy to address the problems facing its members. “One direction is to deepen the fiscal union,” he said, adding the policies pursued up to now, such as the creation of the European Financial Stability Facility and bond buying by the European Central Bank, could only buy the EU time to address the problems it faced.
WB president indicated that risks to the global economy are intensifying, with the euro region’s outlook dependent on European leaders making the right decisions. “We are moving into a dangerous period,” Zoellick said yesterday. While the U.S. is likely to avoid a return to recession, escaping with slow growth, the euro zone is facing a “particularly sensitive time,” he said. Zoellick’s comments add pressure to European officials who have yet to contain a sovereign debt crisis that threatens to engulf Italy. Group of Seven financial leaders, worried about risks to global growth, are likely to agree this week to keep monetary policy accommodative, slow fiscal consolidation in countries where that is possible and implement structural reforms, a G7 source said for BBC. Finance ministers and central bank governors of the United States, Canada, Japan, Germany, France, Italy and Britain (G7) meet on Friday in the French port of Marseilles to discuss what action to take to prop up the slowing global economy. The G7 is likely to discuss the IMF’s call for further recapitalisation of European banks to help cushion the blow from the region’s sovereign debt crisis, the sources said. Ministers from Germany, Finland and the Netherlands were to meet Tuesday to discuss a Finnish demand for collateral in a bailout for Greece, while the Italian Senate will debate an austerity plan amid a strike. Meantime, Tuesday data may show U.S. services industries grew at the slowest pace in more than a year, as markets there resume trading after Labor Day.
European stocks rebound but caution remains
European stock markets rebounded Tuesday, posting mild gains as market participants used recent losses across equities as an excuse to snap up some bargains, although caution prevailed as the euro-zone debt crisis continues and economic data suggest a stalling economic recovery. According to Wall Street Journal, at 07:45 GMT, the benchmark Stoxx Europe 600 index was up 0.3 pc at 224.27. London’s FTSE 100 index was 0.6 pc higher at 5129.74, while Frankfurt’s DAX was up 0.2 pc at 5256.34 and Paris’s CAC-40 was flat at 3000.72. Asian stocks and U.S. futures fell and the euro slid for a fifth day against the Swiss franc on concern Europe’s debt crisis is worsening. On Tuesday, the Swiss National Bank (SNB) announced that it would set a minimum exchange rate of 1.20 francs to the euro. The euro strengthened against the Swiss currency, rising 8.3 pc to 1.2019 francs. Asian stocks and U.S. futures fell and the euro slid for a fifth day against the Swiss franc. The MSCI (Morgan Stanley Capital International) Asia Pacific Index dropped 1.7 percent at 3:15 p.m. in Tokyo. Also yesterday, the gold rollercoaster was riding high again as the price of the commodity hovered around the USD1,900 an ounce mark, nearing its record level.