China: Europe’s debt troubles may derail global recovery

City A.M. Reporter
CHINA yesterday issued a stark warning to world leaders, cautioning that the burgeoning sovereign debt crisis in Europe could lead to a double-dip recession across the globe.

Chinese premier Wen Jiabao, addressing business leaders during an official visit to Japan, issued his warnings a day after France admitted it will struggle to keep its top credit rating and days after a downgrade of Spain’s credit status again jolted financial markets.

Referring to the risk of a second dip in global economic growth rates, Wen said: “I believe that we can’t say with absolute certainty, so we must undertake close observation and act to prevent it.

“The world economy is stable and beginning to revive, but this revival is slow and there are many uncertainties and destabilising factors,” he said, adding that the EU debt troubles are likely to prove a drag on the economic recovery.

Investors and policymakers around the world are increasingly worried that Europe’s efforts to cut debt will sap the continent’s anaemic growth, denting demand for exports from emerging economies and derailing the global recovery.