The 3 Problems Global Economic Growth is Facing

The Guardian economics Editor Larry Elliot outlines three problems that most be tackled to increase the chances to reverse the global economic slowdown.

1. The European crisis and the way its leaders are reacting or not by pretending everything is under control.
2. Global Imbalances. Trade will be a hot topic this week when representatives from China and Europe meet. Tensions are starting to grow between China and the US over trade.
3. Central banks are running out of ammunition.

He offers an interesting scenario as his conclusion:

It is clear what ought to happen. A re-elected president Obama should sit down in the new year with China’s new premier, Xi Jinping, and Germany’s Angela Merkel to come up with a blueprint for global rebalancing and global reflation. That would involve a revaluation of the yuan and a commitment to stronger domestic demand growth in Germany.

The chances of this happening, though, are slim – even assuming it is Obama rather than the more hawkish Romney sitting in the White House next year. The slowing of the global economy is making policymakers more inward-looking and defensive, with just about every country trying to export its way back to prosperity. Beijing’s policy easing should be enough to prevent any further weakening in the economy, and there were signs from Thursday’s purchasing managers’ index that the manufacturing sector is past the worst. But the world economy looks a long way from returning to sustained, robust growth and the slowdown of 2012 looks set to continue well into 2013.

via Guardian

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