January 18th, 2012
06:53 PM GMT
London (CNN) – The World Bank is not an organization noted for hyperbole and exaggeration. Certainly the sober-suited Washington bankers don't usually go around the world forecasting calamity, unless it is to drum up more support for the disadvantaged and poor.
And that's why their comments surrounding the Global Economic Prospects for 2012 were so unusual. The bank has just downgraded growth estimates for this year, by the biggest amount in three years.
It forecasts the euro area will be in recession (-0.3 %) and developing nations will see growth at 5.4%, down from earlier forecasts of more than 6 percent.
What is most surprising is the clarion call that the outcome for emerging and developing countries could be every bit as bad as 2008-09.
Andrew Burns, the author of the report, warns that an "escalation would spare no one" and growth "could fall by as much or more than in 2008-09." Serious stuff indeed.
At the core of the problems are, of course, the eurozone debt problems and the ripple effects that spread across the globe.
Exporting countries like China will feel the effect as poorer Europeans can no longer buy their products.
At the same time, as the Chinese government is touching the brakes to slow the economy, the U.S. is also starting to slow down as a result of Europe, and there the Obama government has limited room to pick up the fiscal slack.
In fact the canaries warning of dangers ahead are now singing their call just about everywhere.
Whether it is the IMF today asking for a further $500 billion to build up its war chest to fight the debt crises; or The World Bank warning of awful times ahead; or S&P downgrading France et al, we are on notice that the situation is grave and probably getting worse.
Minor incremental gains are usually followed by swift reversals of fortune - witness the way the ECB has warned negotiators of the new EU treaty not to water down their commitments at the December Summit to avoid budget deficits by inserting a get-out-clause in the final treaty.
All of which makes it even more remarkable that politicians and policy-makers keep patting themselves on the back and congratulating each other on the progress being made, especially in the euro zone.
The dangers in Greece are still very real. Banks are hoarding money overnight in record amounts, there is still a crisis of confidence and now, the World Bank has joined in too. Let no-one say we haven't been warned.
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