MTECHTIPS

MTECHTIPS:-Not addressing the US fiscal cliff issue may cause Recession

Unless the fiscal cliff issue in the US is addressed and debt levels not raised by policy makers, the nation could fall back into yet another recession, warns the IMF in its latest World Economic Outlook.“U.S. legislators must soon remove the threat of the fiscal cliff and raise the debt ceiling––if they fail to do so, the U.S. economy could fall back into recession, with deleterious spillovers to the rest of the world. Furthermore, policymakers in the United States urgently need to specify strong medium-term fiscal plans.” the Bank said in a report.Speaking on QE measures adopted by various countries, the IMF also said, “in many advanced economies, injections of liquidity are having a positive impact on financial stability and output and employment, but the impact may be diminishing.”On the eurozone crisis, the Bank said:“The crisis in the euro area remains the most obvious threat to the global outlook. The ECB has put in place a mechanism to improve the transmission of low policy rates to borrowing costs in the periphery, where investors’ fears about the viability of the euro have pushed market rates to very high levels. The periphery