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Eurozone economy to hinder global growth

Eurozone economy to hinder global growth article image
The sovereign debt crisis in Greece has infected the eurozone and will hinder global economic growth, according to Roger Donnelly, chief economist at government credit agency Export Finance and Insurance Corporation (EFIC). Donnelly says because the eurozone comprises 20 percent of world GDP and 16 percent of the world's importing, any funding problems would cause stagnation. He adds there'll be "some interference to economic activity because the eurozone is quite a supplier of capital and lending to other countries, which is now likely to be scaled back" and predicts a rise in unemployment. As for the bailout package handed to Greece, it will provide "temporary financial relief" but won't really address fiscal problems, he said. "Governments at the periphery need to carry out large spending cuts and tax rises to shore up their solvency and deep structural adjustments to boost competitiveness. The trouble is the fiscal and structural adjustments needed are probably beyond these countries’ ‘pain thresholds’. "It is therefore quite thinkable that governments will be unable to repay some of the EU-guaranteed loans they have taken out when they fall due, and at that point will either have to default outright, or persuade EU governments to extend their loans."

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