7 Jun 2012

UN / WORLD ECONOMIC SITUATION AND PROSPECTS

A new UN report says that the euro area debt crisis remains the biggest threat to the world economy. An escalation of the crisis could result in severe turmoil in financial markets and a sharp rise in global risk aversion, leading to a further weakening of global growth. UNTV

Posted at: June 7, 2012 3:29 pm

Duration: 02:23

Available in: SD

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STORY: UN / WORLD ECONOMIC SITUATION AND PROSPECTS
TRT: 2.23
SOURCE: UNTV / ILO /IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH/ NATS

DATELINE: 7 JUNE 2012, NEW YORK CITY / FILE

SHOTLIST:

FILE – RECENT, NEW YORK CITY

1. Wide shot, exterior United Nations headquarters

6 JUNE 2012, NEW YORK CITY

2. Wide shot, dais
3. Wide shot, journalists
4. SOUNDBITE (English) Jomo Kwame Sundaram, Assistant-Secretary-General for the Department of Economic and Social Affairs (DESA):
"There is a strong recognition all over the world that fiscal austerity pursued by many governments has been the main cause for the protracted economic downturn and there is a re-examination of such policies and much more serious reconsideration of the need for fiscal stimulus and other efforts to ensure a strong, sustained and inclusive recovery."

FILE – IMF - RECENT, ATHENS, GREECE

5. Wide shot, Alpha Bank

FILE – IMF - RECENT, BRUSSELS, BELGIUM

6. Wide shot, KBC Bank

RECENT, SAO PAOLO, BRAZIL

7. Wide shot, busy street

6 JUNE 2012, NEW YORK CITY

8. SOUNDBITE (English) Jomo Kwame Sundaram, Assistant-Secretary-General for the Department of Economic and Social Affairs (DESA):
"The election results in France, the elections results in Greece, and also the elections results in a number of states in Germany have fundamentally changed the political atmosphere, and it is for this reason that I am a bit more optimistic. There is very little grounds for optimism if look at the data, but I think the political atmosphere has changed and we are in a situation now where the tide may have turned and we may well see a serious reconsideration of the kinds of policies which the United Nations has been advocating consistently over the last few years in favour of a strong, sustained and inclusive recovery."

FILE – IMF - RECENT, MEXICO CITY, MEXICO

9. Various shots, stock exchange

FILE – IMF - RECENT, LONDON, UNITED KINGDOM

10. Med shot, Swedbank building

6 JUNE 2012, NEW YORK CITY

11. SOUNDBITE (English) Rob Vos, Director of the Development Policy and Analysis Division of the Department of Economic and Social Affairs (DESA):
"If the situation in Greece would worsen, or there would be very severe speculation about it exiting from the Eurozone, that would quickly spill over into the banking system in the rest of Europe and through that could spill over into banking sectors in the countries that also have very high sovereign debt risk like Spain and Italy, and through that into an escalating crisis."

FILE – IMF - 2011, ATHENS, GREECE

12. Zoom out, from locked door to store front
13. Wide shot, boarded up shop

FILE – ILO - 21-22 MAY 2012, FREIBURG, GERMANY

14. Various shots, city scenes
15. Med shot, end of conference

STORYLINE:

The European debt crisis is currently the biggest threat to the world economy, according to a United Nations report released today (7 June), which warns that the austerity measures followed by countries in the region will plunge them further into recession, and calls for a shift in fiscal policies to stimulate growth.

Produced by the UN Department of Social and Economic Affairs (UN DESA), the UN Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions, the report flags that most developed countries are still trying to recover from the 2008-2009 global financial crisis, and notes fiscal austerity measures aimed at ameliorating the debt situation are backfiring.

DESA's Assistant-Secretary-General, Jomo Kwame Sundaram, noted that "there is a strong recognition all over the world that fiscal austerity pursued by many governments has been the main cause for the protracted economic downturn and there is a re-examination of such policies and much more serious reconsideration of the need for fiscal stimulus and other efforts to ensure a strong, sustained and inclusive recovery."

The report stresses that it is essential to change the course in fiscal policy and shift the focus from short-term consolidation to medium- to long-term fiscal sustainability. It also emphasizes that fiscal policies should be internationally coordinated and should support direct job creation and green growth.

Sundaram said that looking at the data, "there is very little grounds for optimism" but pointed out that the election results in France, Greece, and other places "have fundamentally changed the political atmosphere" and "we may well see a serious reconsideration of the kinds of policies which the United Nations has been advocating consistently over the last few years."

High unemployment, deleveraging by banks, firms and households, and bank exposure to sovereign debts are also contributing factors to the economic downturn, the report says, noting that European countries in particular are struggling to overcome these weaknesses.

The update warns that the situation in Italy and Spain currently poses the biggest danger for the euro area as the size of their debts would likely challenge the region's rescue funds.

The Director of the Development Policy and Analysis Division of DESA, Rob Vos, said that "if the situation in Greece would worsen, or there would be very severe speculation about it exiting from the Eurozone, that would quickly spill over into the banking system in the rest of Europe and through that could spill over into banking sectors in the countries that also have very high sovereign debt risk like Spain and Italy, and through that into an escalating crisis."

In addition to a shift in fiscal policies, WESP recommends that monetary policies be better coordinated internationally, and calls for an acceleration of reforms in the financial sector.

WESP projects that world gross product will grow by 2.5 per cent this year and 3.1 per cent in 2013, following growth of 2.7 per cent last year – slightly lower than the forecasts it presented in January.