Recession threat sparks calls for world action
AFP - Wednesday, November 12
LONDON (AFP) - - Britain and the EU called for strong joint action to hold off the recession threatening leading economies as more grim economic and corporate news drove down world stocks on Tuesday.
British Prime Minister Gordon Brown called for a coordinated global "fiscal stimulus" amid reports that his government would soon announce tax cuts to boost the economy, which is on the verge of recession.
"If we have a fiscal stimulus in Britain and it is not repeated in other countries, then it will have far less effect and far less benefit than if it were done in every other major economy around the world," Brown said.
In Brussels, EU Economic Affairs head Joaquin Almunia also called for joint action, speaking as global markets slid on fresh signs that corporate America was buckling under the strain of the worst financial crisis in decades.
"If the EU, and in particular the euro area, is not coordinating the different actions, all the euro area countries will lose," he said.
A lack of coordination would mean "the effects of these measures will be smaller, the efficiency will be lower and the possible results will take longer."
Leaders of the G20 group of biggest developed and emerging nations hold talks in Washington on Saturday aimed at restoring market confidence and stability.
US officials have said the summit is likely to result in an "action plan" including short-term steps to fix the global economy, while other countries, notably France, have pushed for the talks to agree concrete measures.
Amid the grim headlines there was one slightly brighter light in Germany.
The German ZEW institute reported a rise in its investor sentiment index in November, attributing this to prospects that government and central bank action would stem the economic slowdown.
But the slowing trend of the economy bore out the gloomy forecasts made by analysts, ZEW observed.
Five economists meanwhile who advise the German government, forecast that the biggest European economy will not grow at all in 2009, business daily Handelsblatt reported in its Wednesday edition.
UniCredit Bank estimated German gross domestic product will decline 0.7 percent next year and that preliminary GDP figures to be released on Thursday would show the economy already in recession.
Data from Beijing pointed to a degree of resilience by Chinese exports but also underlined global imbalances, showing that the Chinese trade balance showed a record surplus of 35.2 billion dollars (27.6 billion euros) in October.
But the overall story was weaker, with Asian and European markets sinking after more bad tidings from the United States, the world's biggest economy.
In late afternoon trade, London was down 3.19 percent, Frankfurt shed 4.51 percent and Paris gave up 4.94 percent as Wall Street showed a loss of 2.71 percent.
The downturn came a day after Fannie Mae, the US mortgage giant bailed out by the government, posted a 29 billion dollar loss and Washington expanded its bailout of insurer AIG to more than 150 billion dollars.
Fresh reports of companies in difficulties further dampened sentiment.
In Tokyo, a survey found that corporate bankruptcies in Japan had soared 13.4 percent from the year earlier to claim 1,429 companies in October -- the most in a month so far this year.
German media giant Bertelsmann said its profits this year were likely to slump by between five and 10 percent owing to a weaker global economy.
The New York Times reported on Tuesday that US president-elect Barack Obama had asked President George W. Bush for immediate aid for the struggling US auto industry during a White House meeting on Monday.
Volatile markets had risen on Monday, after China announced a massive 586 billion dollar stimulus package, before falling on Tuesday under the weight of bad corporate news.
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Stock brokers go about their business at the stock exchange in the central German city of Frankfurt. Britain and the EU called for strong joint action to hold off the recession threatening leading economies as more grim economic and corporate news drove down world stocks on Tuesday.
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