The New Year began with pundits telling the same old story: the global economy is in crisis. Growth forecasts are being revised downwards for both developed and developing nations. The chieftains of world capital are now choosing to warn the rest of the world of an impending global economic catastrophe if solutions are not found quickly.

Europe and America's financial and economic woes are long and deep - and of their own making. The resulting spasms reflect the accelerating decline of the traditional global financial network, as the power centers of world finance find themselves unable to keep up with the galloping changes in global economic realities.

The Euro area is deep in the economic danger zone. Its public debt rose to 88.4 percent of GDP in 2011. Its economy is forecasted to contract 0.5 percent in 2012 before returning to meager growth of 0.8 percent in 2013. Indeed, the very future of the Euro - its crown jewel - is threatened as member-states face financial meltdowns created by fiscal and monetary overheating. Powerful lenders Germany and France are forced to rethink as the defaults expand. Italy, Spain, Ireland, Portugal and Greece have all moved from boom to bust, as the EU faces its worst recession in living memory. Greece badly needs to pay 14.5 billion Euros in debt redemption and get private creditors to write off over another 100 million Euros - all by March 20, 2012 - to be able to get a 130 billion Euro bailout needed to avoid going bust and setting off another global financial meltdown.

Meanwhile, worldwide unemployment is at unprecedented levels. Some 23 million are jobless across Europe, but Spain has 5 million seeking jobs, accounting for 23 percent of its national workforce, a quarter of the entire population and half of the entire youth labor force - the highest rate in the industrialized world. The International Labour Organization said at the opening of 2012 that with some 800 million workers earning less than US$2 per day and 40 million becoming unemployed annually worldwide, some 600 million paying jobs will be needed over the next ten years. But these jobs will need to be created mainly by a private sector already showing more signs of downsizing than expansion.

Eurozone lenders and international financial regulators are insisting that defaulting countries seeking bailouts implement austerity measures to guarantee lenders healthy rates of return. But the prescriptions are resulting in domestic social and political explosions that are causing even more pain. Greece, already under severe EU and IMF prescription austerities, has now rejected their latest demand that it accept an "external commissioner" to oversee its debt and recovery management, saying the idea of an imposed EU budget overlord would result in loss of its financial sovereignty.

Possibilities of arriving at solutions based on common approaches are diminishing as the 17 EU member-states differ more than they agree on the path to solutions, while the major lending states demand more austerity. Protectionist and populist tones are especially prevalent in France and the U.S., where presidential elections are approaching. Germany has become tight-fisted and London has joined Washington in telling the EU that it isn't doing enough to help itself. Euro-skeptic Britain is also demanding umbrella guarantees for London's financial sector if it is to back the bailout plans.

IMF Managing Director Christine Lagarde urged Europe to boost growth and build a larger firewall to insulate the world economy from a possible "1930s-style crisis". The IMF is also seeking to expand its lending capacity by US$500 billion as it forecasts financing needs of $1 trillion in coming years. It's downgraded its projection for global economic growth this year to 3.3 percent and decreased its estimate for next year to 3.9 percent, repeatedly warning that while the epicenter of danger is Europe, the rest of the world economy is being increasingly affected.

The period between now and March 20 (the Greek default deadline) is already being described as "one of the most important economic periods in history." Amidst predictions of a "moderate recession in the first half of 2012", some 40 world leaders, 2,600 business chieftains and 18 central bankers gathered in Davos in January for the annual World Economic Forum, this time to discuss the very future of capitalism. The 17 EU governments also met in Brussels at the end of January - for their 17th summit in two years - again seeking solutions to the seemingly unending Euro zone crisis.

Unable to surmount or qualm their own soaring domestic economic and financial distresses, Europe and the US began 2012 by sharpening their stances against regimes they have targeted for change in other parts of the world.

With the scalps of Osama bin Laden and Muammar Gadaffi on their totem poles, regime changes in Tunisia and Egypt in the bag and Yemen now within grasp, Europe and the US are ratcheting-up the pressure on Iran and Syria. To Washington's pleasure, the EU has escalated the campaign against Iran by banning oil imports from Tehran and freezing its Central Bank assets. London and Washington are also hastening the decline of efforts towards peaceful solutions in Syria by accusing the Arab League of being too slow or too weak to accelerate regime change in Damascus.

European governments are finding out that those unable to solve the crises are not being re-elected, so panic is setting in. A divided EU is realizing they arrived at a common currency before arriving at common policies, but don't want to turn the clock back. France's Sarkozy, challenged by a Socialist Party candidate who's already beating him at the polls, is hastily changing electoral gear and imposing a new tax on financial transactions. He claims it can extract billions from "those responsible for the crisis" if implemented across the Euro zone.

The chieftains of the global economy are realizing that, now more than ever, they need visionary leadership with a clear road map to economic recovery. But until they find the right balance, the Euro zone continues to slide into the danger zone, threatening to pull the global economy into a real-life manifestation of the Twilight Zone.

The author is a columnist with China.org.cn. For more information please visit: http://www.ccgp-fushun.com/opinion/earlbousquet.htm

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn