Fear of a chaotic Brexit or an escalation of the trade line in the US and China will derail the global economy
The risks to the global financial system have increased over the past six months and will deteriorate if there is a chaotic Brexit or an escalation in the US-China trade dispute, the International Monetary Fund warned.
Low interest rates help to compensate for a fall in global economy growth, the Fund said. But rising levels of government and corporate debt save potential problems for the future.
In its Global Financial Stability Report, the IMF claimed that a stalemate in the Brexit & # 39; threatens to disrupt financial markets, damages investor confidence, impairs corporate confidence & # 39; and creates uncertainty in Europe and the United Kingdom.
Jitters: Low interest rates help to compensate for a decline in global economy growth, the International Monetary Fund led by Christine Lagarde, pictured, has warned
& # 39; Given the increased uncertainties surrounding Brexit negotiations, there is a risk that financial market volatility could rise sharply as key deadlines approach &, # 39;
The fund, led by Christine Lagarde, noted that there was a sell-off on the financial markets in 2018, but this year they had recovered because of the hope that the US and China would trade tensions and expectations that interest rates would be low would abolish.
But they added that vulnerabilities in the system continue to increase as some companies and governments get more debt.
The report reports that companies' balance sheets are strong enough to withstand a moderate economic slowdown or a rise in interest rates, but warned that indebtedness and risk taking have increased.
It said that the volume of bonds – corporate debt issued – considered risky has grown since the financial crisis in the US and the euro zone.
The report also warned that the state of the Italian economy had once again aroused the fear that sovereign debt problems could pass into the country's weak banking system, as happened in the eurozone crisis in 2012.
Italy has a debt of £ 2 trillion, equivalent to around 130 percent of its economy. There are concerns that investors will write down the value of their government bonds, which in turn could affect banks and insurance companies.