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Financial crisis moves into "more political phase": IMF

(Xinhua)

10:37, September 22, 2011

WASHINGTON, Sept. 21 (Xinhua) -- The International Monetary Fund (IMF) said Wednesday the global financial crisis had moved into a "more political phase", reflecting a significant rise in sovereign vulnerabilities in advanced economies and a lack of effective policy reactions.

"Financial stability risks have increased substantially over the past few months," said the IMF in its Global Financial Stability report, a flagship product of the Washington-based international institution.

"Weaker growth prospects adversely affect both public and private balance sheets and heighten the challenge of coping with heavy debt burdens," said the report, adding that monetary policy had only limited room to provide additional stimulus.

Against this backdrop, the crisis -- now in its fifth year -- had moved into a "new, more political phase," the Fund said.

The global lending organization says there have been four phases of the crisis. The first phase started in 2007 when the "subprime crisis" threatend the collapse of U.S. banks.

The second phase was the "banking crisis", in which the systemic banking crisis spread to Europe.

The third phase, the "sovereign crisis", featured euro area periphery sovereign debt problems and medium-term debt burdens in core advanced economies, including the U.S.

Now, the crisis had moved into its "political phase", in which policy makers in advanced economies had difficulties in reaching political consensus on fiscal consolidation and adjustment.

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