(Updates with euro in fifth paragraph.)
Nov. 16 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said Europe’s financial crisis could bring the global economy close to a recession.
“Concrete actions are clearly needed to deal with the sovereign debt and banking sector crises” in Europe, Flaherty said in a speech in Tokyo today. “It could even, potentially, bring the world to the verge of another recession.”
Asian stocks dropped and the euro weakened against the dollar today on concern Europe’s debt woes are spreading after Italy led a slump in euro-area debt. Europe’s economic growth held at 0.2 percent in the third quarter from the previous three months as Germany and France struggled to support the region’s expansion, according to European Union data yesterday.
“It is clear that many significant operational issues remain to be addressed in Europe, and that further timely action is essential,” Flaherty said. “Global growth is weakening, downside risks have heightened considerably, and confidence has waned.”
The euro fell to a five-week low against the dollar and yen. It fell 0.7 percent to $1.3444 at 2:58 p.m. in Tokyo from the close in New York yesterday after touching $1.3433, the weakest level since Oct. 10. The euro dropped 0.8 percent against the yen to 103.48. The MSCI Asia Pacific Index declined 1.6 percent.
Flaherty said while it’s “understandable” for authorities to intervene in the currency market if exchange rate moves are disorderly, the actions generally aren’t supportive of markets determining the value of currencies.
Japan sold yen on Oct. 31 after the local currency climbed to a post-World War II high of 75.35 against the dollar. It was the third intervention this year by Japanese officials, after sales in March and August.
“We also know and we know this from Canadian history that interventions have a limited impact over a short period of time,” Flaherty said.
--Editors: Ken McCallum, Lily Nonomiya
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