Renegade
12-11-2008, 06:46 AM
Thu Dec 11, 2008 5:57am EST
By Jeremy Gaunt
LONDON (Reuters) - Cracks emerged in the global effort to drag the world out of recession on Thursday with Germany attacking Britain ahead of an EU summit for rushing into debt to bail out industries and pump up growth.
Deflation fears grew in China, the United States moved closer to an auto industry bailout, and South Korea and Switzerland slashed interest rates to keep their economies afloat.
In a move that suggested trouble ahead for concerted European and perhaps world efforts to end the financial crisis and restore global economic growth, Germany criticized countries for rushing into untested economic rescue packages.
Finance Minister Peer Steinbrueck urged governments to pause before pledging to spend billions of dollars to try to push their economies out of trouble.
"The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," he said in an interview with Newsweek magazine, published on the magazine's website on Wednesday.
He singled out British Prime Minister Gordon Brown for particular criticism, accusing him of switching to economic policies that would saddle a generation with debt.
"The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he said.
Another German policymaker, European Central Bank Executive Board member Juergen Stark, also indicated concerns about responses to the crisis, saying on Wednesday that the ECB does not have a lot of room for maneuver after its interest rate cut last week.
The comments came as European Union leaders were to meet in Brussels to discuss a 200-billion euro ($260-billion) stimulus package to wrench the bloc out of recession.
French Economy Minister Christine Lagarde was quoted in Germany's Frankfurter Allgemeine Zeitung as saying collective action was needed to fend off a major recession.
But she added: "I am not shocked by the German position. We have the same analysis, diagnosis and the same goals. The tempo is not exactly the same. The British have marched a bit ahead of everyone else."
CHINA PRICES
Deflation pressures that are spreading through Europe and the United States also now appear to be threatening China, the world's fourth-largest economy.
China's annual consumer price inflation fell to a near two-year low in November, a report showed on Thursday, a day after data reflected a collapse in wholesale prices and a startling drop in exports and imports.
The slowdown in inflation is partly due to a collapse in global energy and commodity costs, but also reflects demand-sapping recessions underway in Europe, Japan and the United States.
Deflation, a drop in prices, tends to defer spending and makes it harder for governments to boost growth.
Switzerland and South Korea, meanwhile, cut interest rates by 50 and 100 basis points, respectively.
Korea's cut took rates to 3.0 percent, the lowest since the current policy system was adopted in 1999. For Switzerland it was the fourth cut in two months.
Monetary authorities worldwide have been cutting rates sharply but have had trouble persuading banks to lend more.
HURDLES
The U.S. automaker industry, reeling from financing pressures and a consumer slump, took one step closer to securing a $14 billion rescue from Washington. But the plan faced uncertain prospects in the Senate.
The Democratic-controlled House of Representatives approved the bailout legislation on Wednesday. It would force U.S. automakers to restructure or fail, but Senate Republican pressure could slow down passage of the measure or even block it.
Failure of any of the so-called Big Three carmakers -- Ford Motor Co, General Motors Corp or Chrysler LLC -- would threaten countless more jobs as well as send shockwaves through the global supply chain.
In other company news, Europe's biggest clothing retailer, Zara fashion store owner Inditex, reported nine-month net profit up 4 percent at constant exchange rates, missing forecasts but pleasing analysts with an encouraging outlook for the fourth quarter.
Finnish stainless steel maker Outokumpu cut its fourth-quarter profit outlook and said it would slash jobs and investments due to weak demand.
On financial markets, shares were mixed with Japan's Nikkei rising 0.7 percent and Europe's FTSEurofirst down 0.5 percent.
(Additional reporting by Langi Chiang, Seo Eun-kyung, Kevin Plumberg and Reuters bureaux worldwide; editing by Philippa Fletcher)
http://www.reuters.com/article/newsOne/idUSTRE4B70ME20081211?sp=true
By Jeremy Gaunt
LONDON (Reuters) - Cracks emerged in the global effort to drag the world out of recession on Thursday with Germany attacking Britain ahead of an EU summit for rushing into debt to bail out industries and pump up growth.
Deflation fears grew in China, the United States moved closer to an auto industry bailout, and South Korea and Switzerland slashed interest rates to keep their economies afloat.
In a move that suggested trouble ahead for concerted European and perhaps world efforts to end the financial crisis and restore global economic growth, Germany criticized countries for rushing into untested economic rescue packages.
Finance Minister Peer Steinbrueck urged governments to pause before pledging to spend billions of dollars to try to push their economies out of trouble.
"The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," he said in an interview with Newsweek magazine, published on the magazine's website on Wednesday.
He singled out British Prime Minister Gordon Brown for particular criticism, accusing him of switching to economic policies that would saddle a generation with debt.
"The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he said.
Another German policymaker, European Central Bank Executive Board member Juergen Stark, also indicated concerns about responses to the crisis, saying on Wednesday that the ECB does not have a lot of room for maneuver after its interest rate cut last week.
The comments came as European Union leaders were to meet in Brussels to discuss a 200-billion euro ($260-billion) stimulus package to wrench the bloc out of recession.
French Economy Minister Christine Lagarde was quoted in Germany's Frankfurter Allgemeine Zeitung as saying collective action was needed to fend off a major recession.
But she added: "I am not shocked by the German position. We have the same analysis, diagnosis and the same goals. The tempo is not exactly the same. The British have marched a bit ahead of everyone else."
CHINA PRICES
Deflation pressures that are spreading through Europe and the United States also now appear to be threatening China, the world's fourth-largest economy.
China's annual consumer price inflation fell to a near two-year low in November, a report showed on Thursday, a day after data reflected a collapse in wholesale prices and a startling drop in exports and imports.
The slowdown in inflation is partly due to a collapse in global energy and commodity costs, but also reflects demand-sapping recessions underway in Europe, Japan and the United States.
Deflation, a drop in prices, tends to defer spending and makes it harder for governments to boost growth.
Switzerland and South Korea, meanwhile, cut interest rates by 50 and 100 basis points, respectively.
Korea's cut took rates to 3.0 percent, the lowest since the current policy system was adopted in 1999. For Switzerland it was the fourth cut in two months.
Monetary authorities worldwide have been cutting rates sharply but have had trouble persuading banks to lend more.
HURDLES
The U.S. automaker industry, reeling from financing pressures and a consumer slump, took one step closer to securing a $14 billion rescue from Washington. But the plan faced uncertain prospects in the Senate.
The Democratic-controlled House of Representatives approved the bailout legislation on Wednesday. It would force U.S. automakers to restructure or fail, but Senate Republican pressure could slow down passage of the measure or even block it.
Failure of any of the so-called Big Three carmakers -- Ford Motor Co, General Motors Corp or Chrysler LLC -- would threaten countless more jobs as well as send shockwaves through the global supply chain.
In other company news, Europe's biggest clothing retailer, Zara fashion store owner Inditex, reported nine-month net profit up 4 percent at constant exchange rates, missing forecasts but pleasing analysts with an encouraging outlook for the fourth quarter.
Finnish stainless steel maker Outokumpu cut its fourth-quarter profit outlook and said it would slash jobs and investments due to weak demand.
On financial markets, shares were mixed with Japan's Nikkei rising 0.7 percent and Europe's FTSEurofirst down 0.5 percent.
(Additional reporting by Langi Chiang, Seo Eun-kyung, Kevin Plumberg and Reuters bureaux worldwide; editing by Philippa Fletcher)
http://www.reuters.com/article/newsOne/idUSTRE4B70ME20081211?sp=true