IMF: Europe Is Heading Toward Recession

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Europe is nearing recession and its banking system faces "extraordinary financial stress" that will not ease quickly, the IMF said as the Benelux countries agreed Thursday to absorb flailing bank Dexia's toxic assets.

Economic growth in the 15 countries using the euro is facing a slump, decreasing from an average 1.3 percent this year to 0.2 percent in 2009; unemployment will increase from 7.6 percent to 8.3 percent, an IMF report said Wednesday, Oct. 8.

IMF analysts also predicted that Germany, Europe's largest economy, will stall in 2009 and France's will grow by a marginal 0.2 percent. Italy and Spain will see their economies shrink by 0.2 percent, according to the semi-annual World Economic Outlook.

With European nations "moving close to or into recession," the IMF urged forceful action by policymakers to combat the crisis with measures such as lower interest rates.

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