World Bank warns of escalating debt crisis

The World Bank has issued a reduction in forecasts for global gross domestic product outlook and has warned that the eurozone debt crisis could escalate significantly over the coming months.

It claimed that Europe is probably already in a period of recession and that global economic forecasts will be much lower as a result. Indeed, the organisation claimed high-income economies are likely to grow by just 1.4 per cent in 2012, while the eurozone will shrink overall by 0.3 per cent, Reuters reported.

"The downturn in Europe and weaker growth in developing countries raises the risk that the two developments reinforce one another, resulting in an even weaker outcome," the organisation stated.

Earlier this month, ratings agency Standard & Poor took the step of downgrading its credit ratings for nine eurozone economies, including Italy and France.

The move had significant impact on blue chip markets across the globe, with the FTSE 100 and Dow Jones Industrial Average both declining on the back of the news.