More grim news that Germany and Britain are battling recession and devastating profit results increased pressure on Wednesday on world leaders ahead of a crisis global economy summit this weekend.
Oil prices plunged after the Bank of England said Britain was probably already in recession and top German experts said Europe’s biggest economy would see no growth next year. Germany is widely expected to announce on Thursday that it is in recession.
The blue-riband panel of independent experts said German economic growth would grind to a halt next year. They criticised measures to jump-start the economy as a “hotchpotch of isolated projects designed to give the impression that the government is doing something”.
Britain’s central bank said: “The economy probably entered recession in the second half of 2008 and output is likely to contract further.”
Other official figures showed British unemployment jumped to an 11-year high of 5,8% in the third quarter, the highest level since 1997.
“The labour market is being hit ever harder by contracting economic activity, depressed business confidence and very tight credit conditions,” said IHS Global Insight economist Howard Archer.
Bad news came from every corner of the world.
Japanese consumer confidence hit a record low, September industrial output fell sharply in the 15 countries that use the euro currency, while Dutch banking group ING recorded its first-ever quarterly loss. And Italy’s top bank, Unicredit, recorded a slump in earnings.
It all added to the sense of crisis ahead of the Washington summit of the 20 leading world economies on Saturday.
With increasing doubts about the future of General Motors and apparent differences between President George Bush and president-elect Barack Obama over how to help the auto industry, share markets were mixed.
While most Asian markets were lower — Tokyo closed 1,29% down, Hong Kong fell 0,7% — following Wall Street’s 2% loss overnight, Europe opened firmer, led by Paris with a gain of 2,13%.
Oil prices sank to the lowest levels since early 2007, however, amid worries about the gloomy economic outlook. Brent North Sea crude for December delivery plunged to $54,35 per barrel in London.
Widespread hopes now rest on the Washington summit providing greater coordination of efforts to tackle the credit crunch, which is pushing the world into recession.
European governments have called for strong joint efforts, but the leaders of the 20 major advanced and emerging economies may struggle to overcome the range of conflicting interests at work, observers said.
They noted in particular that the latest US measures to set a floor to home foreclosures and property prices failed to reassure Wall Street on Wednesday.
“Fears of a global recession and poor corporate news are prevailing,” said Alex Huang at Mega International Investment Services in Taipei. “Should General Motors collapse, its impact would be massive.”
Investors have been unsettled by signs of differences between Bush and Obama over how to help the big three US automakers, General Motors, Chrysler and Ford.
Ford has reportedly asked Berlin for help but the German government is divided on the question of how to help Germany’s key industrial sector.
GM’s German subsidiary, Opel, has already approached Chancellor Angela Merkel, with both firms seeking tax measures to boost the sale of new cars.
“If the United States supports its auto industry, the European Union would be well advised to do the same,” Audi head Rudolf Stadler said.
GM’s chief executive, Rick Wagoner, has said that the US automotive giant only has cash at hand to stay afloat for a few more months.
Obama, who will not attend the G20 summit, is focusing his transition to office, due January 20, on battling the crisis that many fear has put the United States and the world into a deep and long-lasting recession. — AFP