IMF warns of debt menace as recovery slows

WASHINGTON, September 10, 2010 (AFP) – High levels of national debt and a still shaky financial sector threaten to derail the global economic recovery, the IMF warned on Friday. The Washington-based body warned of a funding bottleneck as European nations try to extend their borrowing by rolling over bonds.

“Sovereign debt maturing in vulnerable euro area economies in the second half of 2010 and 2011 exceeds 400 billion dollars.”

“In refinancing this debt, these countries will face competition from the significant rollover needs of both other advanced economies.”

That funding need is expected to reach around four trillion dollars. Amid concerns about the health of European banks and of public finances in Europe, Japan, and the United States, the IMF warned that a stronger-than-expected recovery would now begin to slow.

“Downside risks to the recovery have intensified. The combination of sovereign risk and a still weak financial sector in many advanced economies poses significant risks to the recovery,” the IMF said.

“Global growth has been somewhat stronger than expected during the first half of 2010, but is projected to slow temporarily during the second