A brutal financial crisis showed its teeth on Monday as banking giant Citigroup announced a massive 50 000 job cuts and automakers begged governments to save them amid a spreading global recession.
Japan became the latest giant economy to confirm it had fallen into recession, following Germany and the eurozone last week.
Citigroup said that the global financial crisis and four consecutive quarters of heavy losses forced it to cut its global workforce by 50 000 to 300 000 and further job cuts would follow.
In Washington a battle was looming in the United States Congress, where Democrats were preparing to push for a second $25-billion in aid for the auto industry, but the White House warned car makers must make do with existing funds.
”The administration does not want US automakers to fail,” White House spokesperson Dana Perino said. But opening the government bailout programme for banks to other sectors ”is a slippery slope”, she added.
”If automakers receive assistance from the TARP [financial bailout] programme, other industries will follow.”
Across the Atlantic, reports said desperate executives from automaker Opel were to plead with German Chancellor Angela Merkel for help to keep it alive as its US parent company General Motors struggles to avoid bankruptcy.
Press reports said that Opel would ask Merkel for about €1-billion in guarantees at a meeting on Monday. But German Finance Minister Peer Steinbrueck has ruled out a rescue package for the auto sector.
World stock markets reacted with little enthusiasm to a weekend summit in Washington called to contain the global finance crisis, which stemmed from a collapse in US mortgages due to a profusion of bad debt on high-risk loans.
Investors in Asia and Europe were unimpressed with a vague pledge made on Saturday by leaders in the Group of 20 (G20) to join forces to galvanise growth and overhaul the world’s financial architecture.
The group stopped short of announcing specific steps such as coordinated stimulus spending.
”In the midst of an emergency crisis, to have a statement that reads ‘We will cooperate with each another’ is all but meaningless,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.
Analyst Julian Jessop at Capital Economics said the G20 summit ”failed to deliver any new stimulus measures to rescue the world economy from the current recession.”
But it did at least take some ”first steps on the reform of the global financial system necessary to make it less likely that this crisis will happen again,” he said.
Mitsui warned that ”market sentiment has soured… with all eyes back on the theme of global recession.”
Major European stock exchanges were well into negative territory at midday following a mixed performance in Asia. Frankfurt and Paris each lost more than 2% and London fell 1,68%.
Tokyo’s Nikkei index finished 0,71% higher, despite the recession news. Hong Kong, which is also now in recession, lost 0,1%.
Monday saw no let-up in the flow of bad economic news. Official data showed Japan, the world’s second largest economy, contracted 0,1% in the third quarter after shrinking 0,9% in the second.
Recession is defined as two quarters of negative growth in a row.
”This is not going to be a short or painless recession,” warned Noriko Hama, a professor and economist at Doshisha University.
The Bank of France predicted the French economy was likely to contract by 0,5% in the last quarter of the year, leaving growth for the year at just 0,9%.
France narrowly escaped recession with growth of 0,1% in the third quarter after its economy shrank 0,3% in the second. — Sapa-AFP