Triumf Consulting SL.

World renound US economist Paul Krugman says the U.S. and the European Union are “nowhere close to ending” the financial crisis and German-led austerity efforts may lead to a 1930s-style economic depression.

In the past three months, the global recovery, which was not strong to start with, has shown signs of
further weakness. Financial market and sovereign stress in the euro area periphery have ratcheted up,
close to end-2011 levels. Growth in a number of major emerging market economies has been lower than
forecast. Partly because of a somewhat better-than-expected first quarter, the revised baseline projections
in this WEO Update suggest that these developments will only result in a minor setback to the global
outlook, with global growth at 3.5 percent in 2012 and 3.9 percent in 2013, marginally lower than in the
April 2012 World Economic Outlook. These forecasts, however, are predicated on two important
assumptions: that there will be sufficient policy action to allow financial conditions in the euro area
periphery to ease gradually and that recent policy easing in emerging market economies will gain
traction. Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or
insufficient policy action. In Europe, the measures announced at the European Union (EU) leaders’
summit in June are steps in the right direction. The very recent, renewed deterioration of sovereign debt
markets underscores that timely implementation of these measures, together with further progress on
banking and fiscal union, must be a priority. In the United States, avoiding the fiscal cliff, promptly
raising the debt ceiling, and developing a medium-term fiscal plan are of the essence. In emerging market
economies, policymakers should be ready to cope with trade declines and the high volatility of capital
flows.

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