Vienna - The world economy will grow slightly in 2010, Luxembourg premier and euro group chief Jean-Claude Juncker predicted Friday, one day after the International Monetary Fund (IMF) warned that the global recovery could last more than three years. However, the uptick depended on whether the problem of bad assets that plague financial institutions would be brought under control, said Juncker, who currently presides over the group of countries using the single euro currency.
Instead of choosing the path of massive lay-offs, European economies should "look trustingly to the year 2010, which will see a recovery, if only a slight one," Juncker told reporters in Vienna after meeting Austrian Chancellor Werner Faymann.
European stimulus programmes, which Juncker said account for between 3.4 and 3.7 per cent of the European Unions gross national product, would show effects next year.
Bad assets should be dealt within a European framework, but individual EU countries should find their own ways to tackle the problem, Juncker said.
The IMF said in its latest report that although some major economies begin to show signs of stabilizing, the global economy could remain sluggish well beyond the current year.
The financial crisis, which has wreaked havoc on economies across the world, combined with the global nature of the downturn meant government efforts to revive their economies were having less success than in past crises.
Luxembourg's premier also backed up Austria's protests against comments by US economist Paul Krugman, who said recently that Austria was at risk of going bankrupt owing to its large credit exposure in Central and Eastern Europe.
I always thought Krugman was a wise man, but he evidently isn't, Juncker said about the Nobel laureate, arguing that Austria's risks were manageable.
Austrian banks have granted credits worth 201 billion euros (268 billion dollars) in Central and Eastern Europe, some 70 per cent of the country's gross domestic product.
There are no data showing we don't have a stable budget situation, Austrian Chancellor Faymann said.
The government expects to run a budget deficit of over 4 per cent of the gross domestic product for 2009 and 2010, above the eurozone group's deficit limit of 3 per cent.
