Europe crises causes growth hurdles

Europe’s
debt crisis has created “hurdles” on the path to economic growth, the
World Bank has warned.

Its
latest report forecasts global GDP will expand by between 2.9 per cent and 3.3
per cent in 2010 and 2011 – then strengthen to between 3.2 per cent and 3.5 per
cent in 2012.

But
the report said prolonged rising government debts could push up the price of
credit, denting investment and growth in developing countries.

GDP
globally contracted by 2.1 per cent in 2009.

Developing
economies are forecast to grow between 5.7 per cent and 6.2 per cent each year
from 2010 to 2012, according to the report.

High
income nations, which saw their economies contract by 3.3 per cent in 2009, are
set to grow more slowly this year the report says, at a rate of between 2.1 per
cent and 2.3 per cent.

European
finance ministers and the International Monetary Fund (IMF) this week moved
closer to sealing a $899 billion stabilisation package that would offer loans
to struggling eurozone nations.

It
followed a specific programme to help Greece avoid defaulting on its debts.

The
World Bank said its predictions were based on the assumption that such efforts
by the IMF and European institutions would prevent any country defaulting or
requiring a major restructuring of its debts.

However
it added that developing countries and regions which relied on trade relations
with heavily indebted countries and which were being forced to cut spending in
order to trim their deficits may feel “serious ripple effects”.

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