IMF warns global recession in 2012 'can't be ruled out'

BRUSSELS - IMF Europe director Antonio Borges warned on Wednesday that a global recession in 2012 'can't be ruled out', citing a possibility that 'activity will turn downwards'.

The IMF released its economic outlook for Europe in Brussels, at a time when the eurozone sovereign debt crisis is mutating into a new banking crisis, and 'therefore we recommend changing economic policy' away from austerity and back towards stimulus, the 100-page report said.

Mr Borges said there had been a major change in market sentiments in recent months, and 'many investors all over the world became far more risk averse than before'.

He added: 'We still predict growth in 2012, but very modest', with the probability the economy will 'stall' by year-end making recession a live threat, especially in Europe.

Changes in fiscal policy would be required, he said.

'If ever there was a more significant recession in Europe - I hope that is not the case but we cannot exclude it - then we might have changed recommendations.

'All those countries with fiscal leeway might want to consider that,' he said, though he specifically ruled out Italy and Spain. -- AFP