The International Monetary Fund has highlighted risks of a new financial crisis, warning that global output could be cut by 4% over the next five years
by a repeat of the market mayhem witnessed during the 2008-09 recession.
The IMF used its half-yearly
global financial stability report to call for urgent action on the problems of banks in the eurozone, a third of which it said faced “significant challenges” to be sustainably profitable.
“In the euro area, market pressures also highlighted long-standing legacy issues, indicating that a more complete solution to European banks’ problems cannot be further postponed,” the IMF said.
It added that there was a risk investors would demand high interest rates and that tougher financial conditions would create a “pernicious feedback loop” of fragile confidence, lower growth and inflation, and rising debt.
“Disruptions to global asset markets could increase the risks of tipping into a more serious and prolonged slowdown marked by financial and economic stagnation.”
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