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| Are we circling the drain? |
(CNBC) By Chris Giles - So acute are the risks that few economists are now willing to bet heavily against another global recession in 2012. By common consent, the world economic outlook is much darker today than it appeared in the early autumn.
The eurozone crisis has worsened with contagion spreading through Italy and Spain and now lapping at the door of France. Recoveries remain feeble in other advanced economies. And emerging markets are beginning to feel the pressure.
Policymakers are worried. Christine Lagarde, managing director of the International Monetary Fund repeatedly warned in September that the world economy had entered a “dangerous phase”. By December, she said those threats were materializing. “The global economic outlook will be lower, and in certain parts much lower than what we had initially envisaged,” she told journalists this month in Brazil.
Deeper gloom has infected the Organisation for Economic Co-operation and Development, particularly with the response of advanced-economy politicians. Pier Carlo Padoan, its chief economist, said: “We are concerned that policymakers fail to see the urgency of taking decisive action to tackle the real and growing risks to the global economy.”
And that grim assessment is shared by economists in the private sector. As Goldman Sachs marked down its latest forecasts, Jan Hatzius, its chief U.S. economist, said that growth was being held back in many developed economies by higher taxes and efforts to pay back household and corporate debt. “That combination is likely to see another two years of sub-par growth in the major advanced economies, extending into 2013,” he argued.
The verdict of Eswar Prasad, of the Brookings Institution, was even bleaker. “In early 2009, it was difficult to come up with a glimmer of hope. Here we are again. But what is different now is that the crisis of 2008 has created a huge debt burden, so constraints on policy are much tighter now.”
Read full story at CNBC.com...
