WEF warns of another financial crisis due to high state debt

There is a significant chance of enormous government debts triggering another financial crisis in th

Many of the world's governments have run huge debts as they took drastic measures to pull their economies out of the financial crisis and the ensuing recession.

Their precarious financial condition and unsustainable debt levels that may soon approach 100 per cent of GDP in case of the US and the UK risk becoming the trigger for the next economic crisis unless they quickly move to balance their books.

WEF's fifth Global Risks Report, that was released two weeks ahead of its annual summit in Davos, Switzerland, highlighted the risks the world economy faces in 2010 and beyond.

It pointed out a slowdown in Chinese economy and an asset-price-bubble collapse as other bad news that the world must watch out for.

China is on an 'unbalanced growth trajectory' which may ultimately lead to a sharp recessionary correction, it said. A drastic slowdown in its growth may fuel social unrest and cause problems for its trading partners.

The report said that the financial crisis has left many developed countries immune to further problems such as a sovereign debt crisis, high real-estate prices, curtailed economic growth and high unemployment levels.

It asked for a gradual and credible withdrawal of fiscal stimulus by the governments so as to ensure a sustained recovery.