Europe dragged into recession
THE 15-nation eurozone's fall into recession is expected to be made official today, with a string of economic indicators pointing downwards and European governments struggling for a unified response.
Germany took the plunge yesterday, falling into recession for the first time in five years as the global financial crisis hammered Europe's biggest economy, according to official figures.
The world's third-largest economy shrank 0.5 per cent in the third quarter, following a contraction of 0.4 per cent in thesecond quarter, thereby fulfilling the criteria for the R-word - two consecutive quarterly contractions.
"For Germany, and the other eurozone economies, this recession will likely be the worst since 1992-93," said Bank of America economist Holger Schmieding.
Meanwhile, the Spanish Government yesterday said the national economy would shrink by 0.2 per cent in the third quarter following a 0.1 per cent contraction in the previous three months.
Speaking on Wall Street yesterday, US President George W.Bush said the global financial crisis did not signal the failure of the free market.
"Government intervention is not a cure-all. While reforms in the financial sector are essential, the solution to today's problems is sustained economic growth.
"The surest path to that growth is free markets and free people," Mr Bush said.
His comments were a veiled warning to French President Nicolas Sarkozy and German Chancellor Angela Merkel, who are pushing for a drastic restructuring of the world's financial regulatory systems.
Leaders representing the Group of 20 nations were gathering in Washington for a working dinner ahead of formal meetings this weekend to discuss reforms that could prevent a repeat of the global financial meltdown experienced over the past three months.
While the summit is not expected to produce dramatic actions, Mr Bush, who is hosting the meeting, has a list of topics he wants the group to consider, including forcing banks to be more transparent in their accounts. He is also proposing changes to the way that some complex securities are traded, and a reform of institutions such as the International Monetary Fund and World Bank.
Official EU figures for the third quarter will be published today, and are expected to show that the eurozone is already trapped in recession following a 0.2 per cent drop in GDP from April to June.
The European Commission has forecast a short, shallow recession for the EU, predicting the 27-nation bloc's combined economy would shrink by 0.1 per cent in both the third and fourth quarters of 2008.
For the whole of 2008, the EU's executive arm forecast that the economy would grow 1.4 per cent but only 0.2 per cent next year.
Those figures are judged to be optimistic by some economists.
A recent slew of job cuts across Europe would tend to back up a more pessimistic assessment.
In the latest corporate blood-letting, British telecoms giant BT announced yesterday it would cut 10,000 jobs by March despite soaring profits.
Piling on the economic misery, the Organisation for Economic Co-operation and Development gave a bleak forecast for its 30 members yesterday, suggesting that GDP will shrink 0.3 per cent overall next year in advanced economies. The US's GDP will contract by 0.9 per cent next year, Japan's by 0.1 per cent, and the eurozone's by 0.5 per cent, the OECD said.
Unexpectedly, Germany is now forecast to be one of Europe's worst, rather than best, performers. The slowdown unfolding in Germany is different from the declines in the US and Britain, which are deleveraging after a decade-long credit-fuelled boom, economists say.
Instead, Germany's troubles show the pitfalls of relying too much on exports and consuming too little at home. Just a few months ago, Germans were convinced that their economy - heavy on old-fashioned manufacturing and relatively light on financial innovation - meant they had a chance of surviving the global slowdown in better shape than other countries.
Germans hadn't run up big credit-card debts. Average house-price growth over the past 10 years has been close to zero.
Europe dragged into recession | The Australian
THE 15-nation eurozone's fall into recession is expected to be made official today, with a string of economic indicators pointing downwards and European governments struggling for a unified response.
Germany took the plunge yesterday, falling into recession for the first time in five years as the global financial crisis hammered Europe's biggest economy, according to official figures.
The world's third-largest economy shrank 0.5 per cent in the third quarter, following a contraction of 0.4 per cent in thesecond quarter, thereby fulfilling the criteria for the R-word - two consecutive quarterly contractions.
"For Germany, and the other eurozone economies, this recession will likely be the worst since 1992-93," said Bank of America economist Holger Schmieding.
Meanwhile, the Spanish Government yesterday said the national economy would shrink by 0.2 per cent in the third quarter following a 0.1 per cent contraction in the previous three months.
Speaking on Wall Street yesterday, US President George W.Bush said the global financial crisis did not signal the failure of the free market.
"Government intervention is not a cure-all. While reforms in the financial sector are essential, the solution to today's problems is sustained economic growth.
"The surest path to that growth is free markets and free people," Mr Bush said.
His comments were a veiled warning to French President Nicolas Sarkozy and German Chancellor Angela Merkel, who are pushing for a drastic restructuring of the world's financial regulatory systems.
Leaders representing the Group of 20 nations were gathering in Washington for a working dinner ahead of formal meetings this weekend to discuss reforms that could prevent a repeat of the global financial meltdown experienced over the past three months.
While the summit is not expected to produce dramatic actions, Mr Bush, who is hosting the meeting, has a list of topics he wants the group to consider, including forcing banks to be more transparent in their accounts. He is also proposing changes to the way that some complex securities are traded, and a reform of institutions such as the International Monetary Fund and World Bank.
Official EU figures for the third quarter will be published today, and are expected to show that the eurozone is already trapped in recession following a 0.2 per cent drop in GDP from April to June.
The European Commission has forecast a short, shallow recession for the EU, predicting the 27-nation bloc's combined economy would shrink by 0.1 per cent in both the third and fourth quarters of 2008.
For the whole of 2008, the EU's executive arm forecast that the economy would grow 1.4 per cent but only 0.2 per cent next year.
Those figures are judged to be optimistic by some economists.
A recent slew of job cuts across Europe would tend to back up a more pessimistic assessment.
In the latest corporate blood-letting, British telecoms giant BT announced yesterday it would cut 10,000 jobs by March despite soaring profits.
Piling on the economic misery, the Organisation for Economic Co-operation and Development gave a bleak forecast for its 30 members yesterday, suggesting that GDP will shrink 0.3 per cent overall next year in advanced economies. The US's GDP will contract by 0.9 per cent next year, Japan's by 0.1 per cent, and the eurozone's by 0.5 per cent, the OECD said.
Unexpectedly, Germany is now forecast to be one of Europe's worst, rather than best, performers. The slowdown unfolding in Germany is different from the declines in the US and Britain, which are deleveraging after a decade-long credit-fuelled boom, economists say.
Instead, Germany's troubles show the pitfalls of relying too much on exports and consuming too little at home. Just a few months ago, Germans were convinced that their economy - heavy on old-fashioned manufacturing and relatively light on financial innovation - meant they had a chance of surviving the global slowdown in better shape than other countries.
Germans hadn't run up big credit-card debts. Average house-price growth over the past 10 years has been close to zero.
Europe dragged into recession | The Australian
