Financial crash WARNING: The BIGGEST threat facing the economy in 2019 REVEALED

The economy has been plagued by fears from analysts of an impending global financial crash in the not-so distant future, with investors rattled over geopolitical tensions and a trade war between the two most powerful nations. The United States could cause global financial chaos if markets lose confidence in President Donald Trump and trade war tensions between China begin to escalate, Yrjö Koskinen told Express.co.uk. From a region perspective, a no-deal Brexit, yellow-vest protests in France and long-term growth problems in Italy, were listed as possible points of contention for the European economy. Britain leaving the European Union without a deal would be “an economic disaster” for the UK, according to Mr Koskinen, and would have knock-on effects for the rest of the bloc.

Brexit uncertainty has already proved detrimental for the pound with Sterling losing around 13 percent compared to the day of the referendum.

While in France, protests over planned hikes in diesel taxes have sparked political instability with President Emmanuel Macron facing the biggest challenge to his presidency.

Mr Macron has been forced to back down on his fuel tax increases after violent protests have hit French cities.

At the same time, Italy found itself locked in a bitter war of words against EU finance chiefs over its controversial budget plans.

The cabinet had originally unveiled the budget in October, targeting a deficit equivalent to 2.4 percent of gross domestic product – three times bigger than the previous government had promised.

The political upheaval has left the euro floundering against major currencies as the nation battles, with the Italian government lowering its economic growth forecast for 2019 to 1.0 percent from 1.5 percent.

Mr Koskinen, Associate Dean for Research and an Associate Professor of Finance at the Haskayne School of Business, University of Calgary, said: “The problems in Europe may lead to a regional financial crisis for example if foreign investors keep on selling Italian government bonds and the yield spread vis-à-vis Germany keeps on widening.

“But I don’t believe that European problems would cause a global crisis.”

But it is problems in the United States that could cause wide-scale global impact, according to Mr Koskinen.

The risk of a US recession in the next two years has risen to 40 percent, according to a Reuters poll of economists

Reuters attributed the concerns to the flattening of the US yield curve – with the spread between two- and 10-year note yields falling to less than 10 basis points.

This is the smallest gap since the run-up to the last US recession.

A flattening yield curve suggests investors believe economic growth and inflation will slow, Reuters claimed.

Mr Koskinen warned the collapse of the Trump administration could cause a huge sell-off of stocks in the US if the President loses confidence from voters.

This could then spark an escalation in the ongoing trade war with China in an attempt to cover up political instability.

Mr Koskinen said: “Political instability in the US may cause a global economic crisis.

“If the Trump administration collapses in 2019 and the markets lose all confidence in the administration’s capacity to govern, we may see a huge sell-off of stocks in the US.

“Things may get even worse, if the desperate Trump administration starts a trade war with China as a distraction from its domestic problems.”

The International Monetary Fund (IMF) has released several downcast forecasts this year, detailing concerns over how the economy is not prepared for the event of collapsing.

Back in October, the IMF warned of “large challenges” ahead “to prevent a second Great Depression” as the international organisation claimed the world markets are at risk of another meltdown, some 10 years after the Lehman Brothers investment bank collapsed.

Then this month, David Lipton, the first deputy managing director of the IMF, warned of “storm clouds building” as he spoke of fears that “crisis prevention is incomplete”.