Financial Crisis Takes Harsh Toll on Europe

The financial crisis has reached extraordinary proportions in the summer and autumn of 2008. At the same time commodity prices increases have boosted headline inflation, depressing consumption. Growth is expected to stagnate in the near term in most advanced European economies as asset price booms deflate and banks curb credit to reduce leverage. Growth will slow down significantly in the emerging economies in Europe as well. Mutually reinforcing deterioration in financial and economic conditions is the main downside risk to the outlook. Stabilising financial conditions and nurturing growth are the key policy priorities. In addition to the outlook, the report presents analytical work on the impact of high commodity prices, the turnaround in the credit and asset price cycles, and the macroeconomic effects of cross-border labor flows.

• Primary Source

IMF: Regional Economic Outlook: Europe: Dealing with shocks, October 2008 http://www.imf.org/external/pubs/ft/reo/2008/EUR/eng/ereo1008.htm

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