'It's more dangerous than ever'

The pace of economic activity across the world was weakening. Hong Kong - Arabstoday The global economy "remains more dangerous than ever" according to a top executive from the International Monetary Fund (IMF). David Lipton, first deputy managing director at the IMF, told delegates at the Asian Financial Forum 2012 in Hong Kong, that the pace of economic activity across the world was weakening. "Although recent indicators in the United States have surprised on the upside and growth there is likely to continue, global economic activity generally worsened in the last quarter of 2011, and the near-term outlook has deteriorated noticeably relative to our September projections," Lipton said. Negative outlook "And, worse, the downside risks that we identified then have started to materialise during the last part of 2011," he added. He said that the most negative outlook globally was in Europe and the escalating Eurozone crisis. "Specifically, concerns about fiscal sustainability and banking sector losses have widened sovereign spreads to unprecedented levels for many Euro-area countries," Lipton said. "Bank funding has all but dried up in the Euro area, leading banks to deleverage by selling assets and restrict lending." Lipton said now deleveraging threatens to push growth below even the reduced forecast that IMF plans to publish next week. "The Euro-area crisis is spilling over and interacting with fragilities elsewhere, bringing risks to many others around the globe," he added. But Lipton said provided political will can be found, there is a good chance to resolve Europe's problems and build a foundation for future growth. He said there's need for more liquidity to manage the European crisis, both for banks and sovereigns, more fiscal consolidation, more growth to sustain the adjustment and more integration — both fiscal and financial — to ensure the viability and stability of the monetary union. Future fiscal discipline Lipton said in recent months, Eurozone leaders have started to outline and indeed implement some of what is needed: they are acting to contain fiscal deficits and have agreed on a mechanism for future fiscal discipline. They have also established a transnational safety net and have taken a harmonised approach to recapitalising banks, while a systemic risk board is now in operation. "The stakes are high. Without bold action, Europe could be swept into a downward spiral of collapsing confidence, stagnant growth, and fewer jobs. And in today's interconnected global economy, no country and no region would be immune from that catastrophe," Lipton cautioned. Euro key to stability European Union internal market commissioner Michel Barnier told the Asian Financial Forum yesterday in Hong Kong that the euro remained essential to the stability of Europe despite the Eurozone crisis. "Let there be no mistake: this is not a crisis of the euro as a currency," Barnier said. "The euro is here to stay. In the last 10 years the euro has proven itself as a true world currency... And despite the difficulties, it remains strong." "The real crisis the Eurozone faces right now is a crisis of confidence. Our political unity and our determination and our ability to rectify what is wrong... are being tested," he said. European leaders are set to meet at a summit later this month to discuss how to boost growth and jobs. At a summit on December 9, EU leaders secured agreement on drafting a new treaty for deeper economic integration in the Eurozone, but the chances for more decisive measures to stem the debt crisis remain uncertain.