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The IMF warns that an escalating euro zone debt crisis threatens global economic recovery. It says good policy needs to be put in place right now to restore confidence and avert a global slump.
The euro zone debt crisis is escalating and could derail the global economic recovery, the International Monetary Fund warned on Tuesday as it called for urgent action to restore confidence.
[Olivier Blanchard, IMF Chief Economist]:
"The world recovery, which was weak in the first place, is in danger of stalling. The epicenter of the danger is Europe, but the rest of the world is increasingly affected. There is an even greater danger, namely that the European crisis intensifies. In this case, the world could be plunged into another recession."
The IMF says the challenge is to restore confidence and put an end to the crisis in the euro area.
[Jose Vinals, IMF Director, Monetary and Capital Markets]:
"Fortunately, it is not too late to put in place the right policies that take us out of the danger zone."
The IMF says the United States and other advanced economies will likely be harmed if Europe's crisis escalates.
Talks between private bond holders and the Greek government have foundered, raising the risk Athens could face a messy default that would touch off a deeper crisis.
IMF Managing Director Christine Lagarde has called on Europe to bolster its rescue funds to erect a wall against financial contagion.
The IMF says the largest impact of the slowdown would likely be felt in central and eastern Europe, which has strong trade links with the euro zone economies.