MONEY MATTERS

Just days before the annual International Monetary Fund (IMF)-World Bank meeting of finance ministers and central bank governors in Washington, the IMF has warned that the world economy was “in a dangerous new phase.” The World Bank and other international agencies have accepted this warning and it is hoped that the high level meeting will bring out a solution to tackle the euro debt crisis and other pressing concerns. The most pressing issue has been the debt crisis in Europe but the European economic powers have failed to reach an agreement on a specific bailout plan. This shows a lack of political will and without political will a solution for euro crisis is impossible. The richer countries in the euro zone like Germany argue that the strong political opposition at home has made their task of funding a rescue plan difficult. During the last fortnight the financial markets were bracing for a major meltdown. If this happens, the prospects for a recession will increase. At the end of the IMF-World Bank meeting it was just asserted that the euro zone along with other member nations was committed to fixing the problem.
The stock markets around the world have shown signs of distress. Even companies with strong balance sheets hesitate to invest amidst all the market turmoil. Investors have lost faith in the Federal Reserve’s ability to stave off a recession. If investors start taking their money out, the banks will react by selling sovereign bonds. They will also hesitate to lend to private sector and this will lead to tensions in the U.S., a potential recession in Europe and possible a global recession.

Filed under: Uncategorized by SAJ