INSEAD Knowledge
July 20, 2012
How real is the global impact of Europe’s debt crisis?
Here’s the bad news: Europe’s debt crisis could spread, sending shockwaves across the globe.
How real is this risk? It’s real enough for the World Bank’s new president, Dr Jim Yong Kim, to warn of a deep global recession if European policymakers do not take the necessary steps to restore stability.
According to Kim, no country is immune. He said decisions in Brussels also affect fisherman in Senegal and software programmers in India. Kim fears that Europe’s crisis could even lead to a severe reduction (four percent or more) of GDP in developing nations – enough to trigger a global recession.
Are the warnings getting through to Germany, the European Union’s paymaster?
Not yet. German Chancellor Angela Merkel has refused to budge on proposals that could help solve Europe’s crisis. She has rejected the Eurobonds, dismissed European Central Bank intervention and turned her back on the creation of a speedy banking union. She continues to stand in the way of a sustainable solution.
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