UN warns of possible new recession

The UN has sharply cut its economic projections for global growth and says that the world is at risk for a new recession. The UN's report on the World Economic Situation and Prospects 2012, released on Thursday, forecasts 2.6 percent growth next year in its main, relatively optimistic scenario — and just 0.5 percent growth in its pessimistic scenario. That's significantly below its May forecast that the global economy would grow 3.6 percent in 2012. Following two-year of anemic and uneven recovery from the global financial crisis, the report said, "the world economy is teetering on the brink of another major downturn" and "the risks for a double-dip recession have heightened." A global stock market rally stalled on Thursday as euphoria over major central banks' coordinated cut to borrowing costs wore off. But hopes that European leaders will deliver a long-term solution to the debt crisis next week helped push euro zone borrowing rates sharply lower. Stocks and bonds had jumped on Wednesday when central banks in Europe, the US, Canada and Japan made it cheaper for banks to borrow dollars, helping them to operate smoothly at a time of tight credit. China's central bank also acted to release money for lending and to shore up growth by lowering bank reserve levels for the first time in three years. Worries about Europe's financial system and the European Central Bank's reluctance to intervene heavily in bond markets have seen borrowing rates rise for European countries in recent weeks. That raised fears of a global credit crunch of the type that plunged the world economy into recession in 2009.