The International Monetary Fund warns that Europe and the United States could slide back into recession by next year if they do not take immediate action to tackle economic problems and debt issues that could spread to the rest of the global economy.
The eurozone debt crisis is growing and seems to have no end in sight and default by Greece is looming, while the United States economic recovery is faltering, resulting in increased volatility in financial markets.
Those two regions present the biggest risks to the global economic outlook, the IMF said, warning that political gridlock could block remedial action. The IMF also warned Japan to lower its public debt and undertake a more ambitious plan.
“Policy indecision has exacerbated uncertainty and added to financial strains, feeding back into the real economy,” the IMF said in its latest World Economic Outlook report.
The IMF cut its forecast for global growth to 4.0 percent for this year and next, cutting projections for almost every region of the world and saying risks remained tilted to the downside. Just three months ago it had projected an expansion of 4.3 percent for 2011 and 4.5 percent for 2012.
The IMF warned European leaders to do whatever it takes to preserve confidence in national policies and the euro, and it urged the European Central Bank to lower interest rates if risks to growth persisted.