IMF makes public debt warning (could be entering a "new phase" with rising public debt threatening)

AFP on Yahoo ^ | 4/20/10 | AFP

[NormsRevenge]

WASHINGTON (AFP) – The economic crisis could be entering a "new phase" with rising public debt threatening to undermine the stability of the global financial system, the International Monetary Fund warned Tuesday.

In a biannual report on economic stability, the IMF said the latest challenge to the world's rocky financial system came as banks were regaining their footing amid the nascent global recovery.

"Risks to global financial stability have eased as the economic recovery has gained steam, but concerns about advanced country sovereign risks could undermine stability gains and prolong the collapse of credit," the report said.

"Without more fully restoring the health of financial and household balance sheets, a worsening of public debt sustainability could be transmitted back to banking systems or across borders."

In its Global Financial Stability Report, the IMF scaled back its estimate of bank writedowns since the start of the crisis through 2010 to 2.3 trillion dollars, from 2.8 trillion in October.

The fund also estimated that banks had already written off 1.5 trillion dollars of the 2.3 trillion.

Sovereign debt grew sharply with the economic crisis, as many governments not only had to bail out ailing banks, but also pay for rising unemployment benefits and economic stimulus programs.

[NormsRevenge]

The International Monetary Fund logo is seen along Pennsylvania Avenue in Washington, DC. The economic crisis could be entering a "new phase" with rising public debt threatening to undermine the stability of the global financial system, the IMF warned. (AFP/File/Tim Sloan)

[AngelesCrestHighway]

When the economic reality comes home to roost!....