Greece submits fresh plan on eve of EU emergency summit

ATHENS, Greece - Greek Prime Minister Alexis Tsipras presented new proposals to European leaders Sunday aimed at ending his country's debt crisis, on the eve of a summit that could determine whether Greece crashes out of the eurozone.

In a telephone call with German Chancellor Angela Merkel, French President Francois Hollande and European Commission President Jean-Claude Juncker, Tsipras detailed a "mutually beneficial deal", the Greek premier's office said in a statement.

Italian Prime Minister Matteo Renzi urged the two sides to seize a "window of opportunity", saying all conditions were in place for them to reach a "win-win accord".

Athens said its new proposals were aimed at reaching a "definitive solution" to the five-month standoff between Athens and its creditors -- the European Commission, International Monetary Fund and European Central Bank -- as fears deepened over a potential "Grexit" from the eurozone.

The heads of the 19 eurozone countries will hold an emergency summit on the crisis in Brussels on Monday under pressure to prevent Greece from defaulting on its debt with a June 30 payment deadline fast approaching.

Sanity will prevail

The head of Greece's biggest bank said she thought "sanity will prevail" on Monday.

"To enter into such uncharted waters and take up all the risk both for the eurozone and for Greece for two or three billion (euro) difference, I think it's insane," National Bank of Greece chief Louka Katseli told BBC radio.

Greece's anti-austerity government met Sunday to refine its proposals, while a European source said Tsipras and Juncker "held talks Saturday and will again speak Sunday", adding that there were many exchanges and "informal work under way to find a solution".

Failing a deal, Greece is likely to default on an IMF debt payment of around 1.5 billion euros ($1.7 billion) due on June 30, setting up a potentially chaotic exit from the eurozone.

Last Wednesday the Greek central bank put the risk in stark terms saying: "Failure to reach an agreement would... mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and -– most likely -– from the European Union."

The IMF was called in to help rescue Greece at the end of 2009 when the debt-plagued country could no longer borrow on international markets.

The EU's involvement in the huge bailout, which was to provide 240 billion euros ($270 billion) in loans in exchange for drastic austerity measures and reforms, runs out at the end of this month, but IMF support was supposed to continue to March 2016.

Talks between Greece's radical-left government and its lenders have been deadlocked for five months over the payment of the final 7.2 billion euro tranche of the bailout, with talk also turning to an extension of the European help.

For the Greek government any extension of the bailout should be about kickstarting the country's devastated economy and not further austerity.

They also want an easing of the country's crippling debt burden, which officially stood at 312.7 billion euros, or 174.7 percent of gross domestic product, in March.

The international lenders have rejected a series of proposals from Athens, insisting on their own mixture of cuts and reforms.

Minister of state Nikos Pappas, who is close to Tsipras, said the counter-proposals would be "unacceptable to whichever Greek political party" was in power.

Bridging the gap

Alekos Flambouraris, another Tsipras minister, said Saturday that Athens would propose reworked measures that "bridge the gap", while also predicting that Greece's creditors would not be satisfied with the gestures, Greek media reported.

"You'll see they won't accept loosening budget (restrictions), or our proposal on the debt," he said of two main sticking points in the talks.

But the country's Finance Minister Yanis Varoufakis, whose flamboyant style has irked many of his European counterparts, turned the tables by putting the onus on the leader of paymaster Germany to do a deal.

"The German chancellor has a clear decision to make on Monday," he wrote in an op-ed for the Frankfurter Allgemeine Zeitung.

"On our side, we will come with determination to Brussels to agree to further compromises as long as we are not asked to do what the previous (Greek) governments have done: accept new debt under conditions that offer little hope for Greece to repay its debts," he wrote, without specifying the compromises.

Demonstrators around Europe on Saturday took to the streets to protest against spending cuts and austerity measures taken by their governments, and expressing solidarity with Greece.

source: interaksyon.com

Eurozone sinks further into recession

BRUSSELS  - The 17-nation eurozone sank further into recession in the last three months of 2012 as the debt crisis continued to exact a heavy price, official data showed Wednesday.

The eurozone economy shrank 0.6 percent in the fourth quarter of 2012 compared with the third quarter when it contracted 0.1 percent, the Eurostat data agency said, confirming initial estimates given in February.

For the full 27-member European Union, the economy was 0.5 percent smaller in the fourth quarter after a marginal gain of 0.1 percent in the third, Eurostat said.

A recession is counted as two consecutive quarterly economic contractions.

Compared with fourth quarter 2011, the eurozone economy was down 0.9 percent and the EU 27 off 0.6 percent.

Among the major economies, European powerhouse Germany shrank 0.6 percent in the fourth quarter after a gain of 0.2 percent in the third and France slipped 0.3 percent after growth of 0.1 percent.

Non-euro Britain lost 0.3 percent after sharp growth of 1.0 percent in the third quarter, boosted by the London Olympics.

Among the fourth quarter best performers were Estonia, which grew 0.9 percent and Lithuania, up 0.7 percent, while bailed-out Portugal was the weakest, with its economy shrinking 1.8 percent.

Eurostat said that for 2012 as a whole, the eurozone economy contracted 0.6 percent and the EU 0.3 percent.

Data so far for 2013 suggests the European economy is stabilising after a very bad 2012 but the outlook remains weak and uncertain.

Howard Archer of IHS Global Insight said the eurozone recession may have deepened in the fourth quarter but it should mark the bottom of the slump.

"The good news is that the fourth quarter of 2012 almost certainly marked the low point for eurozone economic activity as a significant easing of eurozone sovereign debt tensions underpinned by the European Central Bank's policy actions" has boosted confidence and the markets, Archer said in a statement.

"The bad news is that real economic activity is yet to show major improvement in many countries and it looks highly likely that growth will remain a major struggle for the eurozone for some time to come."

source: interaksyon.com

Euro zone economy falls deeper into recession

BERLIN/PARIS - The euro zone slipped deeper into recession in the last three months of 2012 after its largest economies, Germany and France, shrank markedly at the end of the year.

It marked the currency bloc's first full year in which no quarter produced growth, extending back to 1995.

Economic output in the 17-country region fell by 0.6 percent in the fourth quarter, the EU's statistics office Eurostat said on Thursday, following a 0.1 percent drop in output in the third quarter.

The drop was the steepest since the first quarter of 2009 and more severe than the average forecast of a 0.4 percent drop in a Reuters poll of 61 economists.

For the year as a whole, gross domestic product (GDP) fell by 0.5 percent.

Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there are no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia.

The big economies set the tone.

Germany contracted by 0.6 percent on the quarter, official data showed, marking its worst performance since the global financial crisis was raging in 2009.

France's 0.3 percent fall was also slightly worse than expectations.

Worryingly for Berlin, it was export performance - the motor of its economy - that did most of the damage although economists expect it to bounce back quickly.

"In the final quarter of 2012 exports of goods declined significantly more than imports of goods," the German Statistics Office said in a statement.

The euro hit a session low against the dollar after the weaker than forecast German reading and dropped again after the release of full euro zone figures.

Back revisions to the French figures showed its output fell by 0.1 percent in each of the first and second quarters of 2012, meaning the country has already experienced one bout of recession in the last twelve months.

While the European Central Bank's pledge to do whatever it takes to save the euro has taken the heat out of the bloc's debt crisis, even its stronger members are gripped by an economic malaise that could push debt-cutting drives off track.

French Prime Minister Jean-Marc Ayrault acknowledged for the first time on Wednesday that weak growth was putting his government's deficit goal for 2013 out of reach.

Economists say the euro zone may also shrink in the first quarter of 2013 although more resilient Germany is expected to rebound.

"The chances that the (German) economy will return to growth at the beginning of this year are very good. The early indicators are all pointing upwards," said Andrea Rees, chief German economist at UniCredit.

"The question is how strong the first quarter will be. We expect growth of 0.3 percent but it could be more."

Dutch GDP dropped 0.2 percent over the quarter, keeping it in recession, while the Austrian economy shrank at the same rate.

Weak periphery

For the more embattled members of the currency bloc, matters are of course worse.

Italy suffered its sixth successive quarterly fall in GDP - this time by a sharp 0.9 percent - putting it into a longer slump than it suffered in 2008/2009.

Its recession has been deepened by austerity measures that outgoing Prime Minister Mario Monti introduced to stave off a debt crisis.

With an election due on February 24/25, all sides in a three-way race between Monti's centrist bloc, Pier Luigi Bersani's center-left coalition and Silvio Berlusconi's center-right are pledging to cut taxes to try to kickstart economic growth.

Spain, the euro zone's fourth largest economy, released figures two weeks ago which showed it remained deep in recession after a 0.7 percent contraction in the fourth quarter.

Madrid is also pressing on with harsh austerity measures to cut its debt but may be given more time to meet its deficit targets by the European Commission if its economy worsens further.

There are signs that countries like Spain are starting to benefit from harsh internal devaluations - marked by wage falls and job losses aimed at making companies leaner and more productive.

The ECB predicts the euro zone will pick up later in the year although its currency, if it keeps strengthening, could quickly snuff out any of those hard-won competitive advantages for its high debt members.

More recent data for January have already suggested some upturn in the first months of 2013, in the bloc's stronger members at least, and if improvement comes it is likely to be seen in Germany first.

"The debt crisis has ebbed significantly and the global economy has turned up," said Joerg Kraemer at Commerzbank. "Therefore all the important early indicators for Germany are pointing upwards. I expect noticeable economic growth again in the first quarter."

source: interaksyon.com

European leaders seek Asian support on debt crisis

VIENTIANE - Dozens of European and Asian leaders will gather in impoverished Laos on Monday for a major summit set to be dominated by the eurozone debt crisis and growing territorial tensions in the region.

Top European officials including French President Francois Hollande and Italian Prime Minister Mario Monti are due to spearhead efforts to reassure Asia that the long-running eurozone crisis is finally coming under control.

The diplomatic offensive is seen as a sign of the growing importance that debt-laden Europe places on Asia's fast-growing economies, and its desire to counter increased US engagement in the region.

"We believe Asia is more important every day in terms of economic development," European Commission chief Jose Manuel Barroso told reporters in Bangkok ahead of the summit.

"Europe is one of the most important partners in Asia in terms of investment and trade," he said. "We want to discuss the possibility of trade and investment but also the challenges of stability and security in the region."

European Union president Herman Van Rompuy is also among those converging on Laos, a landlocked country of just six million people on the verge of joining the World Trade Organization as it opens up its fast-growing economy.

But German Chancellor Angela Merkel -- who warned over the weekend that it would take more than five years to overcome the euro debt crisis -- will not attend, sending her foreign minister instead.

The Asia-Europe Meeting, held every two years, provides an opportunity to boost links between two regions that together account for about half of the global GDP.

Europe "should be looking to Asia for greater economic activity", Philippine Foreign Secretary Albert del Rosario told AFP in the Laos capital Vientiane ahead of the two days of talks.

"We are able to offer many areas of investment and trade for them. I think the opportunity is there for both sides," he added.

Europe's leaders may also lobby Chinese Premier Wen Jiabao to deploy some of Beijing's trove of about $3 trillion in foreign exchange reserves -- the largest in the world -- to invest in EU bailout funds.

Asian leaders for their part are expected to press Europe to take swift action to calm a crisis that has battered the world economy and set back efforts to reduce global poverty.

"A stronger Europe, the sooner the better, is good for everybody around the world," Indonesian Trade Minister Gita Wirjawan told reporters in Vientiane.

Some Asian participants, including the Philippines, also want to put Asia's maritime sovereignty disputes on the table, but China is likely to resist.

China claims sovereignty over nearly all of the South China Sea, home to vital shipping lanes and believed to be rich in oil and gas deposits. The Philippines, Brunei, Malaysia, Vietnam and Taiwan also claim parts of the sea.

Separately, China, Japan and South Korea are embroiled in various territorial disputes that have stoked tensions in the region.

About 50 leaders or their representatives -- including Myanmar President Thein Sein -- are due to attend the gathering, which comes against a backdrop of improving ties between Europe and Southeast Asia thanks to a series of dramatic political reforms by the country formerly known as Burma.

Outrage in the West over the former junta's human rights abuses -- including the longtime detention of Nobel laureate Aung San Suu Kyi and other political prisoners -- soured the atmosphere of past ASEM meetings.

But since a reformist government took power last year, overseeing the release of political detainees and Suu Kyi's election to parliament, the West has begun rolling back sanctions and foreign firms are lining up to invest.

In recent months, however, deadly Buddhist-Muslim clashes in western Rakhine state have cast a shadow over the reform process, and European leaders may use the summit to call for an end to the bloodshed.

Security concerns including Iran, North Korea and Syria are also believed to be on the agenda, along with global terrorism, climate change and sea piracy.

source: interaksyon.com

Moody's changes EU rating outlook to negative

SYDNEY - Moody's Investors Service has changed its outlook on the Aaa rating of the European Union to negative, warning it might downgrade the bloc if it decides to cut the ratings on the EU's four biggest budget backers: Germany, France, UK and Netherlands.

The move will add to pressure on the European Central Bank to provide details of a new debt-buying scheme to help deeply indebted euro zone states at its policy meeting on Thursday.

Back in July, Moody's changed its outlook for Germany, the Netherlands and Luxembourg to negative as fallout from Europe's debt crisis cast a shadow over its top-rated countries. The outlook on France and the UK are also negative.

"The negative outlook on the EU's long-term ratings reflects the negative outlook on the Aaa ratings of the member states with large contributions to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45 percent of the EU's budget revenue," the ratings agency said.

Moody's said the EU's rating would be particularly sensitive to any changes in the ratings of these four Aaa member states, implying that if it downgraded these four it might also cut the EU's rating.

Likewise, Moody's said the outlook for the EU could go back to stable if the outlooks on the four key Aaa countries also returned to stable.

The agency also changed to negative the outlook the European Atomic Energy Community (Euratom), on whose behalf the European Commission is also empowered to borrow.

source: interaksyon.com

Asian Cities to Become Top Finance Centres by 2022-Survey

LONDON (Reuters) - Top UK traders and dealmakers bruised by intense banker bashing believe an Asian city will take over as the world's dominant financial centre within 10 years, according to a survey.

They also relegated London to third place from second as their preferred location behind Singapore and New York, the poll by headhunters Astbury Marsden found.

Nearly two thirds of 450 British investment bankers surveyed said Hong Kong, Shanghai or Singapore would be the top global finance centre in 10 years.

One fifth felt London would be the world leader in 2022 and one sixth said New York would hold no.1 spot.

"A fast growing, low tax and bank friendly environment like Singapore stands as a perfect antidote to the comparatively high tax and anti-banker sentiment of London and New York," said Mark Cameron, operations chief at Astbury Marsden.

The annual ‘Preferred Location Survey' also found Singapore is the city where British bankers would most like to live, claiming 31 percent of the vote, up from 27 percent last year.

New York was second with a fifth of votes while London slipped to third with 19 percent of the votes versus 22 percent last year.

"Financial centres in the West have taken a real battering since the start of the financial crisis," said Cameron.

"Cities like Singapore and Hong Kong have been quick to capitalise on setbacks in London and New York, courting investment banks and reacting to demand from expats," he added.

Investment banks and trading firms in New York and Europe have struggled to maintain profitability in recent years amid economic uncertainty partly linked to the ongoing euro zone debt crisis.

Bankers and traders in the United States and Europe also face the prospect of draconian restrictions on their riskier practices, moves likely to impact future profitability.

Commodities trader Trafigura said in May that Singapore would become its main trading centre as it seeks to tap demand in Asia, dealing a blow to its former home Switzerland.

Asian banks, in contrast to their Western peers, avoided much of the damage inflicted by the latest financial crisis and have benefited in recent years from solid economic growth and a booming commodities market across the Asia-Pacific region.

source: nytimes.com

Eurozone headed back towards recession

BRUSSELS - The eurozone veered back towards recession with the latest growth figures out on Tuesday showing its economy shrinking by 0.2 percent and analysts warning of falling economic output right through 2013.

Germany steered clear of the worst of the debt crisis to post better-than-expected growth of 0.3 percent in the period from April to June, and France held on for zero growth, but the experts saw precious little good news going forward.

"The big picture is that the economic growth required to bring the region's debt crisis to an end is still nowhere in sight," said London-based Jonathan Loynes of Capital Economics.

"The slowdown has spread from the periphery into the core," said Tom Rogers, an analyst with Ernst & Young in London, one of many analysts to highlight a growing "north-south divide."

"Positive readings in Germany and the Netherlands (0.2 percent) are to be welcomed, but with conditions in the rest of Europe deteriorating further, and export markets farther afield also cooling, it is looking increasingly likely that output in the core economies will contract during the second half of the year," Rogers added.

Italy's economy lost 0.7 percent during the quarter and Spain 0.4 percent, with the economic implosion in Greece continuing unabated -- a 6.2 percent contraction after a 6.5 percent contraction in the first quarter of 2012.

These were to be expected, but, said Howard Archer of IHS Global Insight, it was "notable and worrying that GDP also contracted in Belgium and Finland," by 0.6 percent and 1.0 percent respectively.

Tipping an overall GDP contraction for the eurozone in 2012 of 0.5 percent, he said these countries "are being dragged down by the problems of Greece, Spain, Italy and Portugal."

He said IHS forecasts thereafter "are based on the assumption that Greece leaves the eurozone around mid-2013.

"We expect a strong policy response to limit the fall-out but modest eurozone recession is still expected as a consequence in the second half of 2013," Archer added, tipping a 0.2 percent contraction for next year too.

A recession is commonly defined as two consecutive quarters of contracting activity. The eurozone posted flat growth in the first quarter of this year.

The flash estimates from the EU also show how badly Europe now lags behind its main economic and trade partners, with comparative Eurostat figures saying GDP rose by 2.2 percent quarter-on-quarter in the United States and 3.6 percent in Japan.

"Only once the Eurocrisis is back under control can a rebound in investment lead to a return to trend growth in core Europe," said Christian Schulz of Berenberg in a note issued in London.

He highlighted France as a case apart between Germany and similarly-structured neighbouring economies such as Austria that are broadly holding on, and the tumbling economies of the south.

"In terms of economic confidence, it remains firmly part of core Europe, but it is losing competitiveness ... France has to bring down its excessive public deficit eventually," he underlined.

Schulz noted France is continuing to lose competitiveness to southern eurozone countries going through difficult adjustments, with imports outpacing exports and taking the trade deficit to record highs.

French Finance Minister Pierre Moscovici, whose Socialist government has to cut its budget deficit from around 4.5 percent of GDP this year to the EU limit of 3.0 percent by the end of 2013, called the result "very weak" but held to the government's forecast for 0.3 percent growth in 2012.

Germany's economy grew fractionally faster than the 0.2 percent forecast by analysts, but slower than the 0.5 percent seen in the first quarter.

"Positive impulses came from both consumer spending and from net foreign trade," national statistics office Destatis said.

Not all experts were gloomy for Germany's prospects, Newedge Strategy analyst Annalisa Piazza stating that "the German economy remains relatively resilient and the expected effects of the eurozone debt crisis remained limited."

source: interaksyon.com

Bank of France Points to Recession in Third-Quarter

PARIS (Reuters) - France's economy is likely to slip into recession in the third quarter, the Bank of France said on Wednesday, forecasting a contraction of 0.1 percent for the second quarter running which adds to signs Europe's economic prospects are still worsening.

The estimate, which followed the Bank's forecast last month for a similar contraction in the second quarter, suggests France's 2 trillion euro economy may struggle to meet the government's forecast for 0.3 percent growth this year.

Struggling with a debt crisis and resulting budget austerity which has devastated its southern half, Europe also faces signs of stagnation and outright recession in its biggest economies.

Britain's central bank is expected to all but back off a prediction of growth for this year in a report later on Wednesday, while the latest batch of data from Germany shows both imports and exports falling.

Figures on Wednesday also showed France's trade gap widened to 5.99 billion euros in June, defying analysts' expectations for an improvement as exports of cars and transport materials slumped.

"In July, industrial activity posted a slight contraction due mainly to lower levels of activity in the automotive and textile sectors," the Bank of France said in its monthly survey. "The outlook for the coming months suggests a slight slowdown in economic activity ... GDP is expected to decline by 0.1 percent in the third quarter."

France is due to publish official preliminary data on second quarter economic growth next Tuesday.

President Francois Hollande's Socialist government has predicted the economy, which posted zero growth in the first quarter, would return to expansion in the second half of the year.

In its monthly business survey, the Bank of France said that sentiment in both the industrial and service sectors weakened to a reading of 90 in July, from 91 in June.

Purchasing managers indexes (PMIs), which gauge business activity and have a good record of tracking economic growth, showed order books at euro zone companies shriveled last month as the downturn in Germany and France became more entrenched.

source: nytimes.com

Asian markets rise ahead of European summit

HONG KONG—Asian markets rose Tuesday following a strong performance on Wall Street and on hopes EU leaders will come to an agreement on dealing with the eurozone debt crisis at an upcoming summit.

Tokyo gained 1.10 percent, or 95.40 points, to end at 8,729.29, Seoul rose 1.64 percent, or 29.56 points, to 1,828.69 and Sydney climbed 1.16 percent, or 47.4 points, to 4.121.0.

In the afternoon Hong Kong climbed 1.29 percent and Shanghai rose 0.81 percent.

Attention is now on an informal meeting in Brussels on Wednesday where the crippling debt crisis that threatens the eurozone project will be top of the agenda.

"People are feeling a little more optimistic because European leaders look as though they might put some strong growth policies in place rather than just austerity," Stan Shamu, market strategist at IG Markets in Australia, told Dow Jones Newswires.

Ahead of the talks dealers were given a boost by Germany and France who said Monday they would do whatever it takes to keep Greece in the euro amid political turmoil in the country.

"We agreed that we have to do everything to keep Greece in the euro club," said German Finance Minister Wolfgang Schaeuble after the first official meeting with his new French counterpart Pierre Moscovici.

Schaeuble hosted Moscovici to thrash out a common line for the summit, after Germany was seen as being more isolated over its drive for austerity as the answer to the ongoing debt crisis.

Greece has returned as the key issue in Europe after polls on May 6 saw 70 percent of the electorate vote against pro-austerity parties but with no overall winner.

Many now fear a new vote on June 17 will see a victory for parties who campaigned against a bailout plan, which would in turn lead Athens to default on its debt obligations and leave the euro.

There are also concerns about the state of Spain's banks, which are staggering under huge bad loans after a 2008 property crash. Economy Minister Luis de Guindos forecast the Spanish economy would contract this quarter at the 0.3 percent rate it has for the past half year.

On currency markets the euro eased from a small rally in New York that was fuelled by hopes for the EU meeting.

It bought $1.2793 and ¥101.60 in early Asian trade Tuesday, compared with $1.2815 and ¥101.62 in New York late Monday. But the single currency was up from the $1.2779 in Asia Monday and the four-month low of $1.2642 seen Friday.

The dollar was at ¥79.43 Tuesday against ¥79.30.

On Wall Street Monday the main indexes posted strong gains. The tech-rich Nasdaq was the best performer, up 2.46 percent as a strong showing from two of its biggest firms Apple and Google outweighed an 11 percent slump in market debutant Facebook.

The Dow finished up 1.09 percent and the S&P 500 climbed 1.60 percent.

Oil prices were up in afternoon Asian trade, with New York's main contract, light sweet crude for delivery in June, 14 cents higher at $92.71 a barrel on its last trading day, and Brent North Sea crude for July gaining seven cents to $108.88.

Gold was worth $1,590.00 an ounce at 0600 GMT, compared with $1,596.40 late Monday.

In other markets:


Taipei rose 1.15 percent, or 82.66 points, to 7,274.89. Leading smartphone maker HTC surged 6.02 percent at Tw$431.5 while Hon Hai Precision added 4.81 percent at Tw$87.2.

Wellington gained 1.04 percent, or 36.47 points, to 3,529.86. Telecom was up 3.5 percent at NZ$2.64 and Fletcher Building added 1.8 percent to NZ$6.38 while Contact Energy added 0.41 percent to NZ$4.86.

—Agence France-Presse

source: gmanetwork.com

IMF: Europe crisis could halve China's growth

WASHINGTON — An escalation of Europe's debt crisis could slash China's economic growth in half this year, the International Monetary Fund said Monday, urging Beijing to prepare stimulus measures in response.

The IMF, in an economic outlook report on the world's second-largest economy, highlighted China's vulnerability to global demand.

"The global economy is at a precarious stage and downside risks have risen sharply," the IMF said.

"The most salient risk is from an intensification of feedback loops between sovereign and bank funding pressures in the euro area, resulting in more protracted bank deleveraging and sizable contractions in credit and output in both Europe and elsewhere."

The IMF outlined the negative impact if the eurozone crisis tipped Europe into a deep recession, dragging China's growth lower mainly due to shocks through trade.

In that "downside scenario" China's growth would fall by around 4.0 percentage points this year from the 8.2 percent rate the IMF projected in January, the Washington-based institution said.

In that case, "China should respond with a significant fiscal package."

"The weak external outlook underscores the importance of accelerating the transformation of China's economy to reduce its vulnerability to the vagaries of global demand."

The IMF forecast last month that its "downside scenario" would shave 1.75 percentage points off 2012 global growth, currently projected at 3.3 percent. — Agence France-Presse


source: gmanetwork.com