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People's Daily Online>>China Business

World economy headed for tailspin?

By Zhou Xiaoyuan (People's Daily Overseas Edition)

08:32, November 15, 2011

Edited and translated by People's Daily Online

Beijing, Nov.15 (People's Daily Online) --Fears continue to grow in Europe now that Greece’s debt crisis has spread to Italy.

Christine Lagarde, chief of the International Monetary Fund, said that if people do not act together in a bold way, the global economy runs the risk of a downward spiral of uncertainty, financial instability and potential collapse of global demand?

European debt crisis more severe than subprime mortgage crisis

Zhong Wei, director of the Financial Research Center at Beijing Normal University, said that given the current situation, the European debt crisis will be more than twice as harmful as the U.S. subprime mortgage crisis in 2008.

When the subprime mortgage crisis occurred, the global economy was in a state of deflation, and other countries could adopt relatively loose monetary policy under the influence of the United States to stimulate economic growth.

Now, little room is left for further loosening monetary policy. Zhong predicts that the euro zone is likely to disintegrate in the next five to 10 years. Even if it does not disintegrate, there would be some changes in the structure of the euro zone, such as a reduction in the number of its member states.

Global economy faces risk of decline once again

Ba Shusong, associate director of the Financial Research Institute under the Development Research Center of the State Council, said that it is still a precondition for other powerful countries of the euro zone to rescue Greece that Greece carries out domestic structural adjustment.

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