U S & Europe could slip into recession

The IMF said financial volatility had increased dramatically as investors worried about an escalating debt crisis in the euro zone and a weakening US recovery. Those two regions present biggest risks to global economic outlook, it said, warning that political gridlock could block remedial action. The fund also called for a more ambitious plan to lower Japan’s public debt.

The IMF, in its latest World Economic Outlook report, cut its forecast for global growth to 4.0 per cent for this year and next, shaving projections for almost every region of the world and saying risks remained tilted to downside. Just three months ago it had projected an expansion of 4.3 per cent for 2011 and 4.5 per cent for 2012.

The message to European leaders was they should do whatever it takes to preserve confidence in national policies and the euro, and it urged the European Central Bank to lower interest rates if risks to growth persisted.