daytrading oct 6 pre-market, page-29

This is a worry long term.

The International Monetary Fund has dropped its growth forecasts for Europe and warned that another global recession in 2012 cannot be ruled out.

The IMF sounded the warning while urging European governments to recapitalise their banks to stem the crisis which is threatening economic growth.

The IMF report forecasts growth for Europe to slow to 2.3 per cent in 2011 and to 1.8 per cent in 2012.

If governments do not shore up their banks, a recession - defined as two consecutive quarters of negative growth - cannot be ruled out.

The negative growth outlook comes at a time when the Greek-inspired debt crisis has already claimed its first banking victim in Franco-Belgian bank Dexia.

In a controversial move, the IMF report has recommended a change to government policies away from austerity and back towards stimulus.

Citing a "far more risk-averse" mood among investors worldwide, IMF Europe director Antonio Borges said the best Europe could hope for would be "very modest" growth.

Any "stall," though, would demand a reversal by this year's end of austere 2011 fiscal policies, and "all those countries with fiscal leeway might want to consider that".

He specifically ruled out Italy and Spain from turning towards US or British-style stimulus, but his report underlined: "The pursuit of nominal deficit targets should not come at the expense of risking a widespread contraction in economic activity."

While leaders examine coordinated efforts to construct a financial firewall around banks now facing collapse over bad exposure to sovereign debts, Mr Borges said the bill for a new banking bailout could be achieved for the relatively small sum of "100-200 billion euros."

Stronger European countries, the report said, should be pumping more money into their economies with the exception of Italy and Spain. Economic growth in Britain has been revised down to just 0.1 per cent in the second quarter.

The report came as Greek 30,000 civil servants went on strike, paralysing the government, airports and public transport in protest at ever-deeper austerity measures.

They are angry about plans to suspend staff on partial pay, part of new cutbacks that come on top of salary and pension cuts.
European stock markets closed sharply higher, bouncing back from sustained heavy losses on hopes European nations will support their banks to prevent the eurozone debt crisis from spreading.

London's FTSE-100 index of leading shares jumped 3.19 per cent, while in Frankfurt, the DAX soared 4.91 per cent. In Paris the CAC-40 advanced 4.33 per cent. Other European markets posted similar gains.

And in New York, the Dow Jones Index gained 1 per cent, boosted by a rise in commodites such as oil and copper.

British prime minister David Cameron has warned the threat of global recession is as serious now as it was in 2008.

But he has urged Britain to stick with his deficit reduction plan and not to become paralysed by gloom and fear.

He has told the Conservative Party conference in Manchester, the French and German economies have slowed to a standstill, and America was being questioned about its debts.

Mr Cameron made the party faithful a promise to never join the euro or pay the eurozone's debts.

"We are members of the IMF and we have our responsibilities there. But when it comes to any euro bailout mechanism my approach is simple - Labor got us into it and Ive made sure we're getting out of it," he said.