Global economy poised to enter recession

Saturday, 24 September 2011 09:54

Finance ministers have warned that time is running out to find a solution to the eurozone crisis and avoid another global recession.

This weekend G20 leaders are meeting in Washington and have announced that they have set themselves a six-week deadline to find a permanent solution to the euro-debt crisis.

European governments have pledged that they will enact legislation by the middle of October to bolster the European financial stability facility (EFSF), the rescue fund for the euro, by making it more flexible.

European Union officials support the idea of increasing the strength of the EFSF by guaranteeing larger European Central Bank purchases of Italian and Spanish debt to create a buffer zone between the two countries and the debt crisis surrounding other countries within the euro.

Financial and political leaders from around the world have urged European leaders that the time has come to act in a comprehensive and authoritative way to solve the European debt crisis.

The Chancellor, George Osborne, told the BBC that the “Eurozone has not come to the king of conclusive actions we need to see.”

He added that the G20 meeting in Paris in early November “will be the moment we need to see a comprehensive solution.”

Meanwhile, Christine Lagarde, the head of the International Monetary Fund, said at the annual meeting of the IMF and World Bank in Washington, that: “There is a path to recovery. It's narrower than it was three years ago but there is a path and we have options. There are dark clouds over Europe and there is huge uncertainty in the US. And with that we could risk a collapse in global demand.”

Stock markets across the globe had a mixed day as they tried to gauge their reaction to the messages sent by political and financial leaders.

The FTSE 100 rallied at first but soon gave up gains, but finished the day up by 0.5 per cent, making up a fraction of the 4.7 per cent loss suffered on Thursday. The Dow Jones was up by 0.35 per cent.

Gold continued to fall, losing five per cent of its value and the price of US oil slipped to below $80 a barrel.

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