The euro zone debt crisis is escalating and could derail the global economic recovery, the International Monetary Fund warned on Tuesday as it called for urgent action to restore confidence, Reuters reported. The IMF chopped its 2012 forecast for global growth to 3.3 percent from 4 percent just three months ago, saying the outlook had deteriorated in most regions. It projected world growth would strengthen to 3.9 percent in 2013. However, it warned that growth this year would come in about 2 percentage points lower if Europe let the crisis fester. "The world recovery, which was weak in the first place, is in danger of stalling," IMF chief economist Olivier Blanchard said at a news conference. "The world could be plunged into another recession" if the European crisis intensifies, he added. While the Washington-based lender said global activity was decelerating, not collapsing, it said the 17-nation euro zone would likely slip into a mild recession this year, with output contracting by about 0.5 percent. "The most immediate policy challenge is to restore confidence and put an end to the crisis in the euro area by supporting growth while sustaining adjustment, containing deleveraging, and providing more liquidity and monetary accommodation," the IMF said in its latest World Economic Outlook report. The IMF maintained its 1.8 percent growth forecast for the United States in 2012, but cut its projection for Japan to 1.7 percent from 2.3 percent in September. It said economic activity in advanced economies would expand by 1.5 percent on average in 2012 and 2013, too sluggish to make a major dent in high unemployment rates. -- SPA
