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The world stands on the brink of a new economic crisis that would leave countries like Britain “staring down the barrel”, David Cameron has warned.
The Prime Minister said that the failure of leaders in the US and Europe to tackle government deficits now “threatens the stability of the world economy”.
Mr Cameron spoke as stock markets around the world fell sharply again, with the FTSE-100 suffering its biggest drop for more than two years.
Politicians, central bankers and investors are increasingly worried that the world’s biggest economies are sliding back into a recession, dragged down by government debts.
More gloomy economic data yesterday led one of the world’s leading economists to say that Britain, the US and the eurozone are all already in recession, and warn of a second financial crisis worse than that of 2008/9.
Nouriel Roubini, a New York University economist who predicted the last financial crisis, said: “The US, eurozone and UK are effectively in a recession now.”
A global recession was now all but certain he said, adding: “Will it be a mild G7 recession or a severe recession plus global financial crisis as bad or even worse than the 2008-09 one?”
Fears over the state of the eurozone economy weighed heavily on the region's banking sector on Thursday as fears grew that the industry is headed for another meltdown.....
Shares in some of Europe's largest banks fell by 10pc as the cost of insuring European lenders' senior bonds rose to record levels, according to credit default swap prices. The Markit iTraxx Financial Index of contracts on the senior debt of 25 banks and insurers climbed to an all-time high 315.5 basis points.
If banks cannot raise capital in the credit markets which are currently all but closed to them, then taxpayers must pay, the IMF added; first at a national level and ultimately through the use of the European Financial Stability Facility, the eurozone's €440bn rescue fund.
The problem is only likely to intensify following Monday's downgrade of Italy's credit rating by Standard & Poor's and discouraging signals from the US economy throughout the week.
In this age of uncertainty, one thing does seem certain: Europe's banking sector stands on the precipice of a new crisis.
Meanwhile, Goldman Sachs is on course to report its second ever quarterly loss, said analysts at Barclays Capital. The bank, whose only other losing quarter followed the collapse of Lehman Brothers, has been hit particularly hard by falling world stock markets, according to the report, with the volatility in prices making trading revenues harder to generate. Goldman releases its results on October 18.