World Bank sees 'double-dip' recession for parts of Europe

Government finances in high-income countries in Europe, France, the US and the UK are currently on an “unsustainable path,” said Andrew Burns, the World Bank’s manager of global macroeconomics.




“We’re expecting that growth in the second quarter is also likely to be disappointing, quite possibly seeing negative growth in several European countries and a double dip in some of these economies,” he added.



The European Union and International Monetary Fund has set set up a €750bn bail-out fund for countries in danger of financial instability, in an attempt to halt the spread of the region's sovereign debt crisis.



Herman Van Rompuy, the EU president, said this week that the EU would be prepared to extend that rescue package if it proved insufficient.

“Currently there isn’t even the hint of a request to put this rescue plan into practice,” Van Rompuy told Belgium’s Trends magazine. “And if the plan were to prove insufficient, my answer is simple: in this case, we’ll do more.”

The EU hopes to prevent countries such as Spain and Portugal from succumbing to debt woes after a separate €110bn lifeline for Greece failed to contain the fiscal crisis.

A second downturn in Europe could lead to global fall-out, the World Bank said in its 2010 Global Economic Prospects report.

Failure to resolve the debt crisis in Europe could hurt global growth and have “serious” effects on East Asia, where exports and investment are large shares of economies, it said.