IMF and OECD: Europe will be hit hard by US recession

Just in case you still thought that if America collapsed there would be other markets New Zealand could sell their dairy products to. With the collapse of the US, China and Europe will inevitably collapse too.

Reports issued by the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) warn that the United States is entering into a recession and reject all claims that Europe will be able to avoid severe economic dislocations as a result of America?s worsening situation.

The OECD meeting in Paris this week estimated that global losses from the US subprime mortgage crisis would surpass $440 billion. This was a sharp upward revision of its previous estimate of $200-300 billion.

Europe was more vulnerable than many thought to the global financial markets crisis, and would be especially so if trouble spread to the equity derivatives markets, officials said on April 15.

The OECD?s estimate of likely bank losses ranges from $350 billion to $420 billion, based on different assumptions as to the amount of distressed assets the banks will be able to recover. Assuming a 40 percent recovery rate, the OECD estimated losses in excess of $422 billion, of which $87 billion would be borne by US banks?$60 billion by commercial banks and the rest by investment banks.

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