The world economy is experiencing an alarming state of calm before a potentially violent storm. The IMF has warned of significant stability risks associated with the economic slowdown in China and the crisis in the emerging markets, the newspaper reported.
“We are witnessing a classic emerging markets’ crisis, which is [currently] forming,” the article said.
According to the newspaper, all signs of the crisis are present: economic downturn and decrease in exports, rising fiscal deficits, rapidly increasing debts as well as decrease and reversal of capital inflows.
All in all, it means that banks and investors in the industrialized countries, especially in Europe, may face significant risks in a midterm and long term perspective. The risks are initially country- and sector-specific, but if a chain reaction in the emerging markets would arise, it may have fatal consequences for European countries as well.
For the industrialized countries, especially for the highly export-oriented Germany, with its focus on capital goods and on premium cars, the export prospects may deteriorate significantly. Therefore, it is essential for Germany to change its policy and reorient itself.
The country should stake on domestic consumption and focus on the common European market, the author argued.