/ 6 February 2009

US nears crisis deal for economy

United States lawmakers on Friday lurched towards compromise on a vast package to rescue the US economy, the kingpin in a world financial crisis that is taking a heavy toll on global corporate results.

The Senate debated for a fifth day President Barack Obama’s contentious $900-billion plan, which has raised international concern over a protectionist amendment that has now been watered down.

“I would hope that we can complete this legislation tomorrow,” Democratic Senate Majority leader Harry Reid said late on Thursday of the plan, which would include major infrastructure projects and tax-cutting measures.

A spokesperson for US Treasury Secretary Timothy Geithner said he would unveil a separate scheme on Monday to prop up the US banking sector.

This is seen as critical to efforts to help banks on their knees after the collapse of the US subprime home-loan market and the damage to balance sheets.

US unemployment surged in January to 7,6%, the highest since 1992, as 598 000 jobs were cut, the Labour Department reported on Friday.

The number of job losses for the recession-hobbled economy was the worst since 1974, according to the monthly Labour Department report on non-farm payrolls, seen as one of the best indicators of economic momentum.

The department also revised up its estimate of December job losses to 577 000 from 524 000.

Payroll employment has declined by 3,6-million since the start of the recession in December 2007, with around one-half of the decline in the past three months.

In Europe overnight, French President Nicolas Sarkozy sought in a lengthy television interview to calm the nation after million-strong protests across France last week over his government’s handling of the crisis.

He insisted that money his government was lending to French banks would not be a burden on taxpayers and said he would demand reforms in financial markets, including pressure on tax havens and changes in pay for traders in finance.

He also signalled tax cuts for France’s middle class and for businesses, and said that deep cost-cutting reforms to public administration would continue.

The head of France’s biggest union, the CGT, Bernard Thibault reacted angrily on Friday, saying Sarkozy’s plans were a victory for big business.

Meanwhile, in Germany, Europe’s biggest economy, new data released by the Economy Ministry showed industrial output fell much more than expected in December, declining 4,6% from November.

In the business world, the crisis cut ever deeper into corporate results.

The world’s biggest car maker, Toyota, warned that for 2008 it would show its first annual operating loss, of $4,9-billion.

“It was a really tough period,” said top Toyota executive Mitsuo Kinoshita. “We cannot tell what will happen for the next fiscal year, but we hope we are now hitting the bottom.”

In Frankfurt, BMW reported a 5% fall in sales in 2008, and Swedish truck maker Volvo showed a 33% slump in annual net earnings.

“We do not see a return of demand during the first half [of 2009], Volvo chief executive Leif Johansson said.

In the airline sector, Japan Airlines, the biggest carrier in Asia, said it expected a net loss equivalent to $374-million in the year to March.

And British Airways in London reported a net loss of $186-million in the first nine months of its financial year.

The biggest Japanese bank, Mitsubishi UFJ Financial Group, reported a nine-month loss amounting to $462-million.

Japan’s Sharp Company electronics giant forecast a first operating loss, of $335-million, in the year to March and said it would shed 1 500 jobs.

Overnight, in New York, global media giant News Corp reported a quarterly loss of $6,41-billion.

“Our results for the quarter are a direct reflection of the grim economic climate,” chairperson Rupert Murdoch said, echoing the sentiments of multitudes of chief executives around the globe. — AFP