MercoPress. South Atlantic News Agency

China warns of a double-dip recession because of European sovereign debt

Chinese Premier Wen Jiabao

China warned that Europe's struggle to contain soaring debt posed a risk to global economic growth, raising the spectre of a double-dip recession.

Premier Wen Jiabao, addressing business leaders during an official visit to Japan, issued his warnings a day after France admitted it will struggle to keep its top credit rating and days after a downgrade of Spain's credit status again jolted financial markets.

Referring to the risk of a second dip in global economic growth rates, Wen said: “I believe that we can't say with absolute certainty, so we must undertake close observation and act to prevent it.

”The world economy is stable and beginning to revive, but this revival is slow and there are many uncertainties and destabilizing factors,“ he said, adding it was too early to wind down stimulus deployed during the 2007-2009 financial crisis.

Governments around the world ran up record debts during the 5 trillion USD effort to pull the economy out of its deepest slump since the Great Depression and now face a tough balancing act: how to reduce debt without choking off growth.

”Some countries have experienced sovereign debt crises, for example Greece. Is this kind of phenomenon over? Now it seems that it's not so simple,“ Wen said.
”The sovereign debt crisis in some European countries may drag down Europe's economic recovery”.