Eurozone crisis throws global economy into danger zone

The world's economy lies deep in the danger zone due to risks from the eurozone, according to the International Monetary Fund.

As reported by BBC News, the IMF predicts that the global economy can grow by 3.25 per cent in 2012, which is down from the earlier forecast of four per cent. The UK economy's growth forecast has also been slashed to 0.6 per cent from 1.6 per cent.

With GDP to shrink by 0.5 per cent, the eurozone is tipped for a "mild recession" this year. Previously, 1.1 per cent growth was forecast. Shadow chancellor Ed Balls made calls for the Coalition government to rethink the austerity plan it structured in the light of IMF estimates.

Balls said that, in 2011, the IMF was clear on how if growth undershot prior expectations then the Coalition should reconsider the speed of spending cuts as well as tax rises - which between them choked off the country's recovery before the recent eurozone crisis and pushed up unemployment while borrowing forecasts soared.

Balls went to say that now the IMF has slashed its growth forecasts while confirming that British growth will be lower than expected, the UK must reconsider its spending cuts now more than ever in the same manner that other countries with remarkably low interest rates have started doing. In response to Balls' comments, the government said that the IMF predictions match those that were made by specialists at the independently-working Office of Budgetary Responsibility, the organisation that informs the government on its economic policy.