Global economy still at risk: report
The global economy is still at risk with Europe and USA’s public debt on the rise, according to a report by the Bank for International Settlements (BIS), the coordinating body for central banks worldwide.
BIS indicated that public debt in the major markets of Europe and the USA had replaced the private debt that triggered the global financial crisis, risking a repeat of the 2009 credit crunch: “A shock of virtually any size risks a replay of the events we saw in late 2008 and early 2009,” BIS stated in the report.
Policy makers must ensure growth is sustainable and not just fuelled by untenably low interest rates in place in much of the developed world, it recommended: “Although private sector debt has started to decline, public debt has taken its place, with sovereign fiscal positions already on an unsustainable path in a number of countries.”
BIS also warned that “macroeconomic policy is in a vastly worse position than it was three years ago, with little capacity to combat a new crisis”.
Its advice was to withdraw stimulus packages, increase interest rates and reform the financial system to prevent market-wide collapse.