United States President Barack Obama will announce reforms on Wednesday aimed at averting any repeat of the banking crisis that is still driving up unemployment around the world nearly two years after it struck.
Britain has been particularly hard hit by the crisis, which has slashed jobs in its financial sector. However, the number of Britons claiming jobless benefit rose less sharply than expected in May, official data showed on Wednesday.
Even so, British unemployment was running at 7,2% in the three months to April, the highest since July 1997, according to the internationally comparable ILO measure.
”Employees are suffering lower wage growth to protect jobs,” said Amit Kara, economist at UBS. ”You are seeing lower wage growth being compensated by less unemployment. That’s the new deal.”
In Spain, where the 18,1% unemployment rate is the highest in the European Union after the credit crunch burst a construction-led boom, Prime Minister Jose Luis Rodriguez Zapatero assured parliament: ”The government considers that the worst of the crisis has already passed.”
But in France, tyre maker Michelin announced a plan on Wednesday for 1 093 voluntary job cuts, while the head of carmaker Renault was quoted as saying he did not expect the European car sector to recover before 2011.
The US government has been discussing for six months how best to tighten bank and market regulation in response to the crisis, which was triggered by increasingly risky investment particularly in US home loans during a long-running credit boom.
A senior US official told reporters the plan, to be presented on Wednesday, would close one bank regulator, the Office of Thrift Supervision, and put the Federal Reserve in charge of monitoring big-picture economic risks.
”There is going to be streamlining, consolidation … so that you don’t find people falling through the gaps,” Obama told reporters on Tuesday.
”Whether it’s on the consumer protection side, the investor protection side, the systemic risks … It’s going to be a much more effectively integrated system than previously.”
”Return to realism”
The US is struggling to emerge from its deepest downturn since the Great Depression and while belief that the worst is past has propelled global stocks about 40% up from their March nadir, investors have begun to seek firmer evidence that a real upturn is in sight.
”Overall, the risk of a continued sharp contraction in output in the near term had receded somewhat,” the Bank of England said, explaining why it voted earlier this month to keep interest rates at a record low of 0,5% and maintain its efforts to pump money into the economy by buying debt.
However, ”even if developments over the month had been positive, the increase in confidence apparent in some financial market indicators and some household and corporate sector surveys remained fragile,” the bank said in minutes published on Wednesday.
European shares slid for the fourth day, echoing falls across most of Asia as some investors unwound trades betting on a speedy economic recovery, while dollar weakness boosted oil towards $71 a barrel.
”Some of the hype on the recovery seems to have faded and we seem to be returning to realism,” said Peter Dixon, economist at Commerzbank.
Stock corrections have been relatively tame so far, but they have taken world stocks as well as emerging equities down to three-week lows.
Oil gained as dealers were convinced that crude will not fall much below $70 if the dollar continues to weaken. Also, data expected later on Wednesday is expected to show a large fall in crude stocks in the US.
The dollar continues on the back foot after leaders of the emerging Bric nations — Brazil, Russia, India and China — pressed their view at a summit on Tuesday that the crisis has underlined the need for a more diversified monetary system. — Reuters