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Amid turmoil, governments scramble to fight recession

Amid turmoil, governments scramble to fight recession
AFP
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First Published: Wed, Jan 28 2009. 11 10 AM IST
Updated: Wed, Jan 28 2009. 11 10 AM IST
Washington: US President Barack Obama ramped up efforts Wednesday to rescue the faltering US economy with an $825 billion stimulus plan, as other governments stepped in to shore up manufacturers amid the worst financial crisis in decades.
Germany’s cabinet sealed on a €50 billion lifeline to haul Europe’s biggest economy out of recession, in the country’s largest stimulus plan since World War II.
The US House of Representatives was expected to approve the package, a centerpiece of Obama’s efforts to resurrect lost US jobs and kickstart stalled US growth.
Key US Senate committees have begun shaping their chamber’s version of the bill, as Democrats and the White House say they hope to speed the final measure through the US Congress and to the White House by mid-February.
The world’s biggest economy shed 2.5 million jobs last year amid the global financial crisis and seven major corporations announced thousands of job cuts Monday.
The worsening economic turmoil dominated speeches and talks among world leaders and hundreds of top financial and corporate chiefs at the annual Davos forum in Switzerland.
Some countries are set to employ the crisis retreat to seek help. Turkey’s Prime Minister Recep Tayyip Erdogan is to meet top International Monetary Fund officials in a bid to end differences over a loan deal to help Turkey through the financial crisis.
The financial crisis, which intensified last September with the collapse of US investment bank Lehman Brothers, continued to haunt big financial firms.
Japan’s top securities company Nomura reported a record $3.8 billion quarterly loss, blaming the financial meltdown and the cost of buying chunks of Lehman Brothers.
Japanese financial firms are believed to be less exposed than many Western banks to US-linked losses but have been hit hard by weak markets and Japan’s first recession in seven years.
Asian authorities moved to stop the rot, with the Japanese government planning to inject ¥1.5 trillion into ailing companies.
In Washington the Institute of International Finance (IIF) group warned that the current global financial turmoil may take a bigger toll on emerging Asia than the 1997-98 regional crisis, despite the region’s enhanced financial muscle.
Economic growth in the region “has been severely affected by the global collapse in goods demand” resulting from the present crisis, said IIF, a leading association of financial firms.
In Australia official figures showed Wednesday that inflation fell for the first time in two years in the fourth quarter of 2008 as the economic crisis slowed the economy.
A drop of 0.3% in the consumer price index slashed the annual inflation rate to 3.7 percent from 5% in the 12 months to September, the Australian Bureau of Statistics said.
The Reserve Bank of India reduced its growth forecast for Asia’s third-largest economy due to the deepening worldwide recession as it held leading interest rates at historic lows.
Business and banking executives warned at the Global Competitiveness Conference in Riyadh of worse times ahead for the global economy and urged greater efforts by the US government to turn its economy around.
Federal Reserve policymakers in Washington were into the second part of a two-day meeting in search of new tools to stimulate lending and revive an economy that has failed to respond to its zero-interest rate policy.
Joseph Balestrino at Federated Investors said he expected some clues from the Fed on additional efforts to get credit flowing in the economy.
“There’s not much more the central bank can do on the monetary policy front after having lowered its target federal funds rate to a record low,” he said.
But Balestrino said Fed chairman Ben Bernanke and his colleagues “are likely to be more explicit about their plans for quantitative easing — that is, using measures such as direct injections into banks and purchases of debt securities to pump more capital into ailing institutions and the markets.”
A closely watched Conference Board survey showed confidence among US consumers unexpectedly fell in January to the lowest level since the survey began in 1967, a troubling sign for consumer spending which drives two-thirds of US economic activity.
Britain meanwhile unveiled a £ 2.3-billion support package.
“The automotive industry with its more than one million employees ... is at the front line of the downturn with output falling faster and further than any other sector,” Britain’s Business Secretary Peter Mandelson told the upper House of Lords.
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First Published: Wed, Jan 28 2009. 11 10 AM IST