The global economy is close to "staring down the barrel" and is threatened by the failure of eurozone leaders to agree a lasting settlement to stabilise the single currency, David Cameron warned on Thursday night.
As markets tumbled around the world, amid gloomy assessments from the IMF and the World Bank, the prime minister issued his gravest warning about the global economic outlook and bluntly told eurozone leaders to stop "kicking the can down the road". "We are not quite staring down the barrel but the pattern is clear," the prime minister told the Canadian parliament in Ottawa.
"The recovery out of the recession for the advanced economies will be difficult. Growth in Europe has stalled, growth in America has stalled. The effect of the Japanese earthquake, high oil and fuel prices is creating a drag on growth. But fundamentally we are still facing the aftermath of the world financial bust and economic collapse in 2008."
Cameron's speech came as Christine Lagarde, the managing director of the International Monetary Fund, warned world leaders that "time is of the essence" as investors took fright at politicians' failure to tackle sickly global growth and the spiralling eurozone debt crisis.
"The problems in the eurozone are now so big that they have begun to threaten the stability of the world economy," Cameron said. "Eurozone countries must act swiftly to resolve the crisis. They must implement what they have agreed and they must demonstrate they have the political will to do what is necessary to ensure the stability of the system. One way or another, they have to find a fundamental and lasting solution to the heart of the problem – the high level of indebtedness in many euro countries."All seeming to be timed for the IMF & G20 finance ministers meetings happening in Washington this weekend. Cameron's tone was echoed by Harper, who hasn't really been speaking much about world economic affairs beyond the usual platitudes about things being fragile, maybe Canada will have to be flexible about our deficit reduction plans, etc. This seemed to be a real stepping up for him:
"Without key countries taking systemically appropriate and co-ordinated economic measures, without resistance to protectionism and acceptance of more flexible exchange rates, without fiscal consolidation [and] without a commitment by governments to cut rising deficits and reduce what are, in some cases, dangerous levels of national indebtedness - without things such as these, we will not avoid a recession," Mr. Harper said in his speech in the House of Commons. Talking to reporters, he said "uncertainty is getting to dangerous levels."Irrespective of what you think about the substantive details of what he's saying, this new alarmist tone stands out. Raising the possibility that "...we will not avoid a recession." It's like Cameron came to town and it's a whole new ball game. For Flaherty too:
"I think matters will come to a head, quite frankly," Flaherty said during a news conference. "It's always better to get ahead of issues (or) we'll run into the kind of crisis issue that we ran into October 2008."Some other news being made is this letter to Sarkozy, the host of the November G20 meeting that Harper, Cameron, Gillard and the leaders of Indonesia, Mexico & Korea have sent. In the UK they are noting that this could be interpreted as a real break for a British leader to have made, distancing Britain away from the Euro countries and joining with others like us, instead (Guardian link above).
Here are some of the headlines resulting out of yesterday's events:
"Cameron, Harper sound alarm amid global market panic."
"World needs to wake up to recession risk: Harper and Cameron."
"Fear of another recession drives global market carnage."
"The close: Dow, TSX plunge amid fading optimism."
Here's Christine Lagarde calling for concerted world leadership similar to that surrounding the 2008/2009 financial crisis:
All of which may have some impact on provincial elections, particularly if the headlines and bad news continue...