London: The German, French and Italian economies all shrank by more than expected in the last quarter of 2008, data on Friday showed, setting a dismal tone for a weekend G7 finance leaders’ meeting on the global crisis.
Australia’s parliament pushed through a stimulus plan and the US Congress will vote later on Friday on President Barack Obama’s rescue package to lift the economy out of recession.
German GDP shrank 2.1% quarter-on-quarter at the end of 2008, the worst contraction since the country’s unification in 1990.
“The economy is now in its worst postwar recession. Due to this low starting point, we’ve cut our GDP forecast for 2009 to -3.6% from -2.5%. Downwards risks predominate. There can be no talk of economic recovery for now,” said Alexander Krueger of Bankhaus Lampe.
A French prediction of a more than 1% contraction in 2009 added to the gloom before the meeting of G7 financial leaders in Rome this weekend.
Italy’s economy shrank by a quarterly 1.8% in the last three months of 2008, the steepest drop since 1980.
Economic recession, triggered by a banking crisis, is spreading quickly through all continents and threatening social order in developed and developing countries alike.
Companies are struggling. France’s Renault scrapped its once sacrosanct 2009 profit targets, dropped its divided and slashed output as it warned that the crisis would change the landscape of the global auto industry.
But some of Friday’s corporate news from Europe was mroe encouraging. German industrial conglomerate ThyssenKrupp unveiled a better-than-expected pretax profit and new orders in the fiscal first quarter, and saw its shares rise 4%.
More details emerged about plans to lift the US. economy out of recession, with a plan to subsidise mortgages raising hopes for a solution to the slump in the US housing market which has reverberated around the world.
The US Congress is due to vote on an economic stimulus bill later on todayafter Democratic leaders in both houses tied down final details of the deal, which includes about $507 billion in government spending and $282 billion in tax cuts.
Asian shares on Friday reversed three sessions of losses during which investors had sought safe havens, with hopes rising that governments around the world were coming up with measures to cushion the worst of the global downturn.
The MSCI index of non-Japan Asia-Pacific stocks rose 2.48%, partly reversing a 3.5% fall in the previous three sessions. Japan’s Nikkei ended 0.96 percent higher.
In Europe, the FTSEurofirst 300 index was 2% higher in morning trade, led by financials on news of the US mortgage plan.
Last-minute deal-making saved Australia’s A$42 billion ($27.4 billion) stimulus plan. Parliament passed the package after it was sweetened with about $1 billion in separate spending for Australia’s ailing rivers, demanded by a key independent senator.
Australia, boosted by Chinese demand for its commodities, has so far avoided following the United States, Japan and leading European economies into recession, but has had to apply aggressive interest rate cuts and other measures.
The stimulus will be worth about 2% of gross domestic product in 2009 and 1.3% in 2010. The Treasury estimates it will lift growth by 0.5 points this financial year and 0.75% in 2009/10.
With Japan flirting with deflation, Bank of Japan Governor Masaki Shirakawa joined a growing chorus urging G7 finance leaders to take concrete steps to rescue the worsening global economy.
“The world economy is in a very severe situation at the moment, so I want (the G7) to frankly exchange views on economic conditions and the outlook and to discuss policy steps to help stabilise the world economy,” Shirakawa told reporters in Tokyo.
Protectionism has also become a big issue as world leaders try to rescue their economies, and a “Buy America” clause in the US stimulus package is likely to be a hot topic in Rome.
Germany will speak out against protectionist tendencies at the G7 meeting, Finance Minister Peer Steinbrueck said.