Thaindian News

London, Feb 2 (ANI): The International Monetary Fund (IMF) has warned that global imbalances that caused the recent financial crisis and unemployment can recur, and added that developing countries like India and China are already facing a threat of overheating.

IMF President Dominique Strauss-Kahn said the economic rebound across the world is built on unstable foundations, with many rich nations still experiencing job shortages.

He predicts the possibility of civil wars because of the inequalities existing between nations, The Telegraph reports.

“It is not the recovery we wanted. It is a recovery beset by tensions and strain, which could even sow the seeds of the next crisis,” he said.

Citing disturbances in North Africa as a prelude to what may happen as 400 million youths join the workforce over the next decade, Kahn said: “Global unemployment remains at record highs, with widening income inequality adding to social strains. We could see rising social and political instability within nations - even war.”

The IMF has published a paper entitled ‘Inequality, Leverage and Crisis’, and argued that the extreme gap between rich and poor, with echoes of the US in the late 1920s, had actually led to the Great Recession from 2008-2009.

The paper, by the IMF’s modelling unit, warns of “disastrous consequences” for the world economy unless workers regain their “bargaining power” against rentiers, the paper said.

Strauss-Kahn also says China and Germany are the two countries responsible for the current global imbalances as they rely on export surpluses to power growth at the expense of the US and other deficit countries.

The most important question is to deal with the “recurrent problem of some countries’ large external surpluses,” Strauss-Kahn said, adding that failure to curb excesses will lead to global clashes in trade and finance.

Strauss-Kahn also hinted that parts of Asia are exceeding the safe speed limit for growth and needed to “tighten” further before inflation gets out of control. (ANI)