Remember meForgot password?
    Log in with Twitter

article imageWorld Economic Forum warns of a financial, sovereign debt crisis

By Andrew Moran     Jan 16, 2010 in Business
This week the World Economic Forum said there is a one-in-five chance of a second financial crisis that could cost the world at least $1 trillion and a sovereign fiscal crisis.
On Friday, Digital Journal reported that renowned economic forecaster Marc Faber believes there will be a sovereign fiscal crisis where many nations could default, such as Ireland or Portugal, because nations around the globe borrowed too much money during the boom period but cannot pay back the loans during the crisis. Faber, publisher of “Gloom Boom Doom,” also foresees a United States debt crisis within the next five to ten years.
According to the World Economic Forum, there is a more than a one-in-five chance of another asset price bubble crisis, which could cost the global financial system at least $1 trillion. There is also a large chance of a sovereign fiscal crisis whereby a nation may not be able to fund itself on capital markets, reports the London Telegraph.
The Global Risks Report, which is produced together by Citigroup, Marsh & McLennan, Swiss Re, the Wharton School Risk Center and Zurich Financial Services, states that countries around the world are more vulnerable now to future economic difficulties.
Daniel Hofmann, the Chief Economist of Zurich Financial Services, said, reports Domain-B, “In reaction to the financial crisis, many countries have put themselves at risk of overextending their fiscal positions and being burdened with extremely high levels of debt. This could put upward pressure on real interest rates, rein back growth and lead to protracted high levels of unemployment and prevent a global economic recovery from occurring.”
However, the WEF’s contention is that the countries that are most likely to face backlash from the current economic downturn are the United Kingdom and the United States because of the astronomical costs that governments from both states put into their economies and other parts of the world.
“The US and UK will have among the highest debt burdens; the danger may not be of a default, but it will certainly dampen economic activity,” said Robert Greenhill, Chief Business Officer of the WEF.
Panorama reports that the World Bank is suggesting countries to invest at least $35 trillion in infrastructure in energy and agriculture because the UK and other nations are facing a serious energy crisis because of failure to invest in the sector that power the country.
WEF’s Global Risks Report will be discussed in heavy detail at the annual summit in Davos, Switzerland, which will be attended by many of the world’s elite such as Microsoft founder Bill Gates, former United States President Bill Clinton and French President Nicolas Sarkozy.
More about World economic forum, Financial crisis, Marc faber
More news from Show all 6
Latest News
Top News