Spiralling levels of debt may trigger global economic crisis, warns outgoing German finance minister

Berlin: The outgoing German Finance Minister, Wolfgang Schaeuble, gave serious indications saying that the Central Banks like the European Reserve Bank and the US Federal Reserve have been attempting to inject trillions of dollars into the financial markets. Their attempts are giving rise to the formation of ‘new bubbles‘ which in itself is an invitation for the crisis to deepen. As a context to Schaeuble‘s warning The International Monetary Fund has released a report wherein all the prominent leaders of the World are warned and advised to keep in mind that the process of restoring the economy may not last long.  

global economic crisis

Schaeuble, who held the position of a Finance Minister in Germany, at a time when there was a global recession and a crisis in Eurozone, would now assume the role of a Speaker in the German Parliament. Prior to this, Schaeuble in an interview had given indications of the forthcoming economic crisis. As a Finance Minister, Schaeuble strongly supported the policies of budgetary curtailment and financial  control. Hence attention is being drawn to the indications given by him.  

While giving indications of the forthcoming financial crisis, the outgoing Finance Minister gave a  word of caution to the Eurozone also. He said, that there is a tendency at an international level to accumulate more and more liquidity and make it available with ease. As a result both the public and the private sector debt are spiraling. He said like himself, many of the reputed financial experts at an international level are concerned about its fallout.  

He further added that the balance sheets of many banks of the Member Nations in the Eurozone have been crushed under the burden of bad- debt. It must be realized that this situation could risk stability in Eurozone. In order to face a new crisis member countries have to be resilient enough. He also warned the European nations that although the financial conditions may be favourable then it may not last forever.

While Schaeuble had  been giving indications about the financial crisis, the International Monetary Fund (IMF) released a new report. The report  has warned that the process of recovering the economy to normal levels may not last long. The is a lurking danger of global leaders and policy makers becoming smug and complacent due to the current  upbeat in the share and other markets.

The senior officials of the IMF have said  that the telltale signs of the coming economic crisis are visible and a lax approach would be harmful. Costs of goods increasing, China’s debt burden, instability in Catalonia  and uncertainty of Brexit are barriers towards a stable global economy.

Only last month, the prominent investor Jim Rogers cautioned that a very serious financial crisis may have to be faced. In August, the IMF expressed fear that the global economy may have to pay for China’s economic blunders.

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