The International Monetary Fund yesterday sounded the alarm over the global economy amid fresh worries about the outlook in Europe and America.
Christine Lagarde, managing director of the IMF, told an audience in Tokyo that growth around the world will be weaker than expected just three months ago.
She said the situation has deteriorated in crucial emerging markets such as China, India and Brazil as well as in Europe and America. Borrowing costs in Spain and Italy soared as Lagarde declared that ‘more needs to be done’ to save the crumbling single currency.
Dismal: The US jobs market has continued to dampen President Barack Obama’s re-election hopes
On the other side of the Atlantic, official figures showed US employment rose by just 80,000 in June – not enough to cut unemployment of 12.7m or 8.2 per cent of the American workforce.
The disappointing news rounded off a dismal quarter in the US jobs market in a blow to President Barack Obama’s hopes of re-election in November.
Mitt Romney, the Republican challenger in the race to the White House, is focusing on the high levels of unemployment that have dogged Obama’s presidency.
‘There’s just not a lot of momentum in the economy,’ said Sam Bullard, an economist at US bank Wells Fargo. ‘Firms are saying: “Is there really a reason to ramp up hiring right now?”’
Weak job creation in the US fuelled fears that the debt crisis in Europe is taking its toll on the rest of the world.
Lagarde said the IMF will cut its 2012 global growth forecast of 3.5 per cent later this month as the crisis crippling the eurozone spreads.
‘Over the past few months, the outlook has, regrettably, become more worrisome,’ she said. ‘Many indicators of economic activity – investment, employment, manufacturing – have deteriorated. And not just in Europe or the United States. Also in key emerging markets: Brazil, China, India.
‘For make no mistake: this is a global crisis. This crisis does not recognise borders. This crisis is knocking at all our doors. No one is immune.’
The 10-year bond yield in Spain – the amount the government pays to borrow – rose back above 7 per cent into the danger zone that triggered full-blown bailouts in Greece, Ireland and Portugal. Italian bond yields were back above 6 per cent.
The collapse of confidence in the eurozone came just a week after leaders unveiled their latest plan to shore up the single currency bloc at yet another crisis summit – including support for troubled banks and debt-riddled governments.
The darkening outlook this week triggered fresh action to boost growth from the Bank of England, European Central Bank and People’s Bank of China –although it is feared it will have limited success.
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