Bloomberg News

Euro Debt Crisis May Grind World Economy to a Halt, UN Says

December 01, 2011

Dec. 1 (Bloomberg) -- The world economy would grind to a standstill should the 17-nation euro economy fail to overcome its sovereign-debt crisis as risks of a double-dip recession in the U.S and Europe loom, the United Nations said.

In a worst-case scenario, where European leaders cannot prevent a member state from defaulting on its debt, the U.S and Europe will plunge back into recession and the world economy will only grow 0.5 percent next year, according to UN forecasts released today that slash growth predictions made in May.

“There is a danger that the unthinkable is now thinkable,” UN chief economist Rob Vos said in an interview. He said there is a 50 percent chance of the more pessimistic scenario materializing, citing an unraveling Italy as the biggest concern for policy-makers.

Should the debt crisis not be contained, the UN slashed 2012 world growth predictions by 2.1 percentage points, with the 27-nation European Union contracting 1.6 percent and the U.S.economy shrinking 0.8 percent.

“The developed economies are on the brink of a downward spiral,” according to the report.

To contact the editor responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net


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