Joint action vital to fight economic slowdown

November 11, 2008
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, LONDON, November 11 – British prime Minister Gordon Brown and EU Economic Affairs head Joaquin Almunia called separately on Tuesday for increased joint action to hold back the recession now threatening several leading economies.

Brown called here for co-ordinated global "fiscal stimulus" amid reports that the government will soon announce tax cuts to boost the flagging economy.

"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," he said at his monthly Downing Street press conference.

And in Brussels, Almunia said: "If the EU, and in particular the euro area, is not coordinating the different actions, all the euro area countries will lose."

A lack of coordination would mean that "the effects of these measures will be smaller, the efficiency will be lower, and the possible results will take longer to be there."

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 help fix the global economy, while other countries, notably France, have pushed for the talks to agree concrete steps.

Brown and Almunia spoke as grim overall economic and corporate news pushed global stocks into reverse despite an unexpected beam of light for the German economy.

The German ZEW institute reported a modest rise in its investor sentiment index in November from the October level, attributing this to prospects that government and central bank action would attentuate the economic slowdown.

But the slowing trend of the economy bore out the gloomy forecasts made by analysts, ZEW observed.

Data from Beijing pointed both to a degree of resilience by Chinese exports but also underlined global imbalances, showing that the Chinese trade balance showed a monthly record surplus of 35.2 billion dollars (27.6 billion euros) in October, on the back of surging exports.

But the overall story was grim, with Asian and European markets sinking after more bad tidings from the United States, the world\’s biggest economy, which undermined hopes that coordinated action by governments around the world could keep the global downturn from getting worse.

The main European stock markets slumped in early trading, with FTSE 100 index of top equities in London shedding 0.98 percent to stand at 4,360.91. Frankfurt\’s DAX 30 was down 1.78 percent to 4,936.60 points, while in Paris the CAC 40 index slid by 2.30 percent to 3,425.25 points.

Russian shares also fell heavily in early trading and activity on one of the two markets, Micex, was suspended.

Meanwhile, the euro fell against the dollar and the yen in Asian trading ahead of a German business confidence survey that is expected to add to the economic gloom in Europe, dealers said.

The market losses came a day after Fannie Mae, the US mortgage giant bailed out by the government earlier this year, posted a 29 billion dollar loss. Meanwhile Washington expanded its bailout of insurer AIG to more than 150 billion dollars.

The latest dire reports triggered more strains for Asian stock markets, which lost ground on Tuesday in line with US shares overnight. Tokyo lost 3.0 percent while Hong Kong share prices closed 4.8 percent lower. Other markets also posted losses.

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 so far this year.

And German media giant Bertelsmann said that its profits this year were likely to slump by between five and 10 percent owing to a weaker global economy.

In the United States, General Motors CEO Rick Wagoner had said that the company he heads would need state help before president-elect Barack Obama takes over the White House in January, telling industry publication Automotive News that time was of the essence and noting the entire US auto industry was also suffering.

The New York Times reported on Tuesday that Obama had asked President George W. Bush for immediate aid for the struggling US auto industry during a White House meeting on Monday.

Markets have pursued a pattern of wild volatility, rising on Monday after China announced a massive stimulus package before falling on Tuesday under the weight of bad corporate news.

Beijing said its four-trillion-yuan (586-billion-dollar, 486-billion-euro) economic stimulus plan was the best way of helping the international community fight the economic crisis — but declined to specify whether it would reduce China\’s contributions to any global rescue effort that might be agreed on.

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