Centre For European Studies                             FINANCIAL CRISIS WATCHLast updated on 31/03/2009                  ...
Centre For European Studies                                          FINANCIAL CRISIS WATCHLast updated on 31/03/2009     ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 31/03/2009      ...
Centre For European Studies                                        FINANCIAL CRISIS WATCHLast updated on 31/03/2009       ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 31/03/2009      ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 31/03/2009      ...
Centre For European Studies                                        FINANCIAL CRISIS WATCHLast updated on 31/03/2009       ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 31/03/2009      ...
Centre For European Studies                                               FINANCIAL CRISIS WATCHLast updated on 31/03/2009...
Centre For European Studies                                       FINANCIAL CRISIS WATCHLast updated on 31/03/2009        ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 31/03/2009      ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 31/03/2009      ...
Centre For European Studies                                             FINANCIAL CRISIS WATCHLast updated on 31/03/2009  ...
Centre For European Studies                                        FINANCIAL CRISIS WATCHANNEXG20: ECONOMIC SNAPSHOTThe le...
Centre For European Studies                                          FINANCIAL CRISIS WATCH(£563bn) economic stimulus pack...
Centre For European Studies                                        FINANCIAL CRISIS WATCHGERMANYGermanys economy, which ac...
Centre For European Studies                                          FINANCIAL CRISIS WATCHapproved an 80bn euro ($102bn; ...
Centre For European Studies                                          FINANCIAL CRISIS WATCHup to 3.1% of GDP in 2009, a ma...
Centre For European Studies                                        FINANCIAL CRISIS WATCHbanking sector have led the gover...
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Financial Crisis Watch 1 April 2009

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  1. 1. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.CONTENTSFOREWORD BY CES HEAD OF RESEARCHFINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATESFINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDEHIGHLIGHTSOUR COMPETITORS’ VIEWS ON FINANCIAL CRISISUPCOMING EVENTSANNEX www.thinkingeurope.eu
  2. 2. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks. Foreword by CES Head of Research “WATCHTOWER” While the world is gearing up for the G-20 summit in London this week, it seems like amidst all the newtransatlantic harmony, the US and the EU have found a new field for controversy: The question of howmuch stimulus is enough to shorten the depression and bring about recovery as fast as possible. NobelPrize winner Paul Krugman, for instance, has been criticizing the Europeans, and most of all the Germans,quite explicitly – saying EU governments were simply not doing enough borrowing and spending, andwould risk losing a whole decade through stagnation, like Japan in the 1990s. There were two kinds ofEuropean reactions to this rhetoric from across the Atlantic: One was rather blunt and a bit angry, likeacting Czech Prime Minister Mirek Topolanek’s statement that President Obama’s rescue plan is the “roadto hell” – though, of course, Mr Topolanek may have been angry about a few other things, too, like hislosing a confidence vote in the middle of an EU presidency. But even so this language stands out from themajority of European reactions, which were much more moderate and tried to argue the following points:- Most EU countries have considerably more substantial, state-financed health insurance and socialsecurity systems than the US. These amount to a broad-based stimulus package in themselves: Theymaintain, or recreate, purchasing power where it is most needed in depression-stricken economies - amongthe newly unemployed and those threatened by unemployment. Seen in that context, the transatlantic gapin the size of stimulus packages does not look that big.- With its demographic structure, EU countries are still facing a pension crisis in the near future. Too muchborrowing now could exacerbate a future situation which the US, with their much more favorabledemographic structure, do not have to envisage to the same extent.These two points should do much do take some of the bitterness out of the current transatlantic dispute.The one factor on which the EU and the US actually and objectively differ, however, is the question of theoptimal distribution of stimuli over time: Many EU politicians, including the German government, but alsoCommission President Barroso, keep repeating that we should wait to see how the recently enacted stimuliactually work, before we engage in new massive borrowing and spending. The Washington majority viewon this seems to be that in order to have any effect, the stimulus must come massively and suddenly.Ultimately, we will only know in a few years who was right and who was wrong on this. www.thinkingeurope.eu
  3. 3. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATESBulgariaOne of the governments measures to fight the effects of the crisis provides for payments of BGN 120(half of the minimum monthly wage) for three months to every worker, whose employer is forced toreduce their working hours by half, i.e. to four hours a week, because of the lack of orders for theirproduce or services. (29/03/2009)The governments measure to fight the effects of the crisis (Sofia Novinite)Bulgarian chemical companies have already been hit by the global financial crisis, and have seen amarked fall in profit. For the last three months of 2008 the total income of the five companies,Neochim PLC, Orgachim, Kauchuk J.S.CO., BG Polymers LTD, and Vidachim JSC, has decreased by46,2%. The turnover lowered from BGN 159,7 M, for the third quarter of 2008, to BGN 85,9 M, for theOctober-December period. (24/03/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccccccccBulgaria chemical industry collapses over Global Financial Crisis (Sofia Novinite)Czech RepublicThe European Unions Czech presidency blasted US plans to spend hundreds of billions of dollars torevive its economy as a "way to hell", before downplaying the remark to avert a diplomatic crisis.Outgoing Czech Prime Minister Mirek Topolanek said that "the United States is not on the right path"with its costly plans to jump start the worlds biggest economy. (26/03/2009)xxxxxxxxxxxxxxxxxxEU presidency blasts US recovery plans as way to hell (EUbusiness)FranceFrench Prime Minister Francois Fillon has unveiled stringent restrictions on stock options and otherexecutive perks for companies that have been bailed out by the state. Fillon announced thatexecutives of hard-hit companies that have received public money to beat the downturn will have to“renounce their stock options and free share packages”. (30/03/2009)cccccccccccccccccccccccccccccccFrench PM announces bonus bans on bailed-out companies (France24)Frances Renault is to shift part of its production from abroad to near Paris after receiving state aid inexchange for a promise not to shut French plants or axe French jobs, a minister said. Renault lastmonth said its net profits collapsed by 78 percent in 2008 amid a dramatic drop in global demand forcars following the credit crunch. Sales fell 30 percent in the fourth quarter and seven percent for 2008as a whole. (20/03/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccRenault will move car line to France after state aid (EUbusiness) www.thinkingeurope.eu
  4. 4. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.GermanyThe head of Germany’s powerful BDI industry federation launched a vitriolic attack on the US fiscalstimulus, saying aid to the motor industry amounted to a “car war” that could distort competition tothe detriment of Europe. (31/03/2009)cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccGerman industry chief hits out at US stimulus (Financial Times)GreeceThe Greek residential real estate market has been one of the first victims of deteriorating economicconditions. The large stock of unsold flats and detached houses, in conjunction with weak demand,create an unfavorable environment for the country’s residential market. According to most real estateexperts, house prices have been on a slightly downward trend since the beginning of the year as thenumber of transactions also drop. (31/03/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccccResidential housing market up against unfavorable factors (Kathimerini)Greece’s economy is seen slipping into recession this year, according to the International MonetaryFund (IMF) which is expected to lower its expectations for the country’s economic performance in itsnext outlook due in April. The IMF had forecast that Greece’s economy will expand at an annual paceof 0.5 percent in last month’s projections, but has since revised down its expectations for globalgrowth. Meanwhile, officials from ratings agency Fitch Ratings are expected to visit Athens to assessthe state of the economy and Greece’s ability to service its large public debt. (30/03/2009)IMF sees recession in outlook (Kathimerini)HungaryGordon Bajnai, the Hungarian economics minister who is set to become prime minister next week,promised a period of ”painful” crisis management, as the country’s finance minister suggested thenew leader may get less than a year to do his job. He is expected to announce spending cuts, whichcould include dramatic cutbacks to Hungary’s generous social safety net. (30/03/2009)cccccccccccccccHungary faces ‘painful crisis management’ (Financial Times)ItalyThe head of Italian auto giant Fiat slammed state aid given to the car industry in Britain, France andSweden, saying it was "very dangerous" and hurt competition in the sector."The aid should either goto everyone or to no-one," he added. Italy has also moved to help its car industry but only through abonus for people trading in their old vehicle to buy a new one. Fiat, Italys largest private employer,saw sales fall 20 percent in the fourth quarter of 2008 and has announced a string of temporarylayoffs. (28/03/2009)xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxFiat chief slams Europe state aid (EUbusiness) www.thinkingeurope.eu
  5. 5. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.LatviaLatvian Prime Minister Valdis Dombrovskis ruled out a devaluation of the national currency, describingthe issue as a "stumbling block" with the International Monetary Fund. "The International MonetaryFund has no objection to a devaluation of the lat, but the European Commission, Bank of Latvia andthe government do not support this solution," Dombrovskis said. (26/03/2009)Latvian PM rules out currency devaluation (EUbusiness)Latvian Prime Minister Valdis Dombrovskis has warned of more troubled times ahead, saying thecountry’s economic crisis would enter a critical phase following the introduction of severe budget cuts.Government discussions are continuing on the roll out of budget amendments, which is likely toinclude massive cuts across the entire public sector. (25/03/2009)ccccccccccccccccccccccccccccccccccLatvia’s crisis at critical level (Baltic Times)Crisis-hit Latvia may ask for a fresh loan from international lenders in addition to the 7.5-billion-eurobailout it secured last year, Latvias new Prime Minister said Riga agreed a total 7.5-billion-euro loan,including 3.1 billion euros from the EU, 1.7 billion euros from the International Monetary Fund (IMF)and 1.8 billion euros from the other states including the Czech Republic and several Nordic states. Theloans were required to tackle its yawning budget deficit and troubled banking sector. (24/03/2009)cccLatvia may need new bailout (Eubusiness)The NetherlandsDutch Prime Minister Jan Peter Balkenende unveiled a 6.0-billion-euro (8.1-billion-dollar) stimulus planfor 2009 and 2010, but warned of cost-cutting from 2011 to bring down deficits. The plan includesinvestment for road construction, the abolition of a tax on air travel, funding for renewable energiesand measures against youth unemployment. (25/03/2009)cccccccccccccccccccccccDutch PM unveils six-bln-euro stimulus plan (EUbusiness)PolandPoland appears to be weathering the severe slump in the world economy better than many othercountries, especially in eastern Europe. Its economy grew by 2.9% year on year in the fourth quarter of2008, which—although well below an average growth rate of 6.3% in the previous ten quarters—wasin line with results in Slovakia and Romania. Furthermore, Polands performance compared veryfavourably with that of the Czech Republic (0.2%), Slovenia (-0.8%) and Hungary (-2.3%), and faroutshone that of the Baltic states, some of which experienced a double-digit annual fall in output.(30/03/2009)Complacent in Poland (Economist) www.thinkingeurope.eu
  6. 6. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.RomaniaThe International Monetary Fund (IMF) and other lenders have agreed in principle to provide Romania20bn euros in aid. The IMF will lend 12.95bn euros, the European Union will provide 5bn euros andthe World Bank will lend 1bn euros. The European Bank for Reconstruction and Development (EBRD)is to invest up to 1bn euros in Romania over two years. The latest IMF economic program has beenagreed by its staff mission, but needs approval from the executive board and management. Similarlythe World Bank needs to agree its part of the deal and the European Commission must approve itscontribution. (25/03/2009) vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvRomania gets IMF emergency loan (BBC)SlovakiaUnder the influence of the global economic crisis, the general business climate has significantlyworsened in countries such as Slovakia and this is expected to be reflected in the telecommunicationssector. According to an analysis conducted by Deloitte Slovensko, a slowing in the growth of telecomrevenues is expected for 2009 in comparison to the 3.7 percent overall growth of the Slovaktelecommunications market and the 5.3 percent growth of its mobile services segment recorded in2008. (23/03/2009)Economic downturn expected to hit the telecom sector (Slovak Spectator)SpainSpain’s consumer price index appears to have contracted in March compared with the same periodlast year, fuelling fears that the recession-hit country could be entering a deflationary cycle. TheNational Statistics Institute said that a preliminary indicator showed that inflation had slowed to anegative 0.1 per cent for the month, down from a 0.7 per cent increase in March last year. It was thefirst contraction in prices since the current method of calculation was introduced in 1997.(30/03/2009)Deflation fears grow in Spain (Financial Times)Spains decision to rescue a regional savings bank has sent financial stocks in the country lower. TheBank of Spain is to take over Caja Castilla la Mancha in the first bank bail-out in Spain since the globalfinancial crisis began. The government will also back the bank with 9bn euros in guarantees. Shares inbanking giants Santander and BBVA declined on concern over the health of the banks in Spain, wherethe housing market has been badly hit. (30/03/2009)Spain bank bail-out hits shares (BBC)Spain will launch a fresh round of government spending to pull its economy out of recession if anotherstimulus is needed later this year, José Luis Rodríguez Zapatero, prime minister, said on 26 March. Heacknowledged that such a fiscal stimulus would have to be better co-ordinated, more modest andmore focused than the previously announced stimulus packages that are draining the coffers of mostof the world’s big economies. (26/03/2009)cccccccccccccccccccccccccccccccccccccccccccccccccccccZapatero favours ‘green’ stimulus (Financial Times) www.thinkingeurope.eu
  7. 7. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.The European Commission gave its approval to the plans of Spanish authorities to grant 800 millioneuros in public aid to the textile and clothing sector. (24/03/2009)xxxxxxxxxccccccccccccccccccxxxxxxEU approves EUR 800m state aid for Spanish textile sector (EUbusiness) ccccccSwedenSwedish protested on 26 February against the threat of job cuts at the Saab factory there. The loss of750 jobs was announced two weeks later. Saab Automobile may be just another crisis-ridden carcompany in an industry full of them. But just as the fortunes of Flint, Mich., are permanentlyentangled with General Motors, so it is impossible to find anyone in this city in southwest Sweden whois not somehow connected to Saab. (22/03/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccSweden says no to saving Saab (International Herald Tribune)UnitedcKingdomThe number of new cars produced in the UK fell by a record 59% in February, year-on-year, as themotor industry continues to suffer from weak demand. Many major manufacturers have been forcedto suspend or cut production in the face of falling sales. The size of the drop has led to renewed callsfor more government help. However a row over protectionism has broken out after Renaults decisionto move production back to France from Slovenia, prompted by government aid. (20/03/2009)cccccccUK car production in record drop (BBC)Europe and the United States should work closer together as "an unstoppable progressivepartnership" to help pull the world out of its financial and economic malaise, British Prime MinisterGordon Brown. Addressing the European Parliament in Strasbourg, France, Brown called for moreregulation of the financial markets and more stimulus of world economies in a coordinated fashion.(24/03/2009)cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccBrown calls for EU-US cooperation on economic crisis (EUbusiness)FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDEChinaChinas central bank has called for a new global reserve currency run by the International MonetaryFund to replace the US dollar. Central bank governor Zhou Xiaochuan did not explicitly mention thedollar, but said the crisis showed the dangers of relying on one currency. With the worlds largestcurrency reserves of $2tn, China is the biggest holder of dollar assets. Its leaders have oftencomplained about the dollars volatility. (24/03/2009)cccccccccccccccccccccccccccccccccccccccccccChina suggests switch from dollar (BBC) www.thinkingeurope.eu
  8. 8. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.China has increased the pressure on world leaders just days before the G20 world summit by callingfor an overhaul of the global financial system. Chinese officials want a new global reserve currency andreforms of international financial institutions to give developing nations more power. (24/03/2009)China presses G20 reform plans (BBC)JapanJapanese unemployment rose to 4.4 percent in February, up from 4.1 percent the previous month, asfirms cut jobs and close factories to cope with the deepening recession. (31/03/2009)xxxxxxxxxxxxxxxJobless rate rises to 4.4 percent (France24)Japans exports saw a record plunge in February, falling by nearly half compared with a year earlier,according to the countrys finance ministry. Exports fell 49.4% year-on-year to 3.526tn yen ($36bn;£24.6bn), though this was in line with forecasts. The worlds second-largest economy is suffering inthe downturn as demand for its products has collapsed. (25/03/2009)cccccccccccccccccccccccccccccccJapans February exports halved (BBC)RussiaRussias economy will shrink by 4.5% this year because of the global downturn, the World Bank haspredicted. The Bank said Russia, a major oil producer, would be particularly hard hit by the low priceof oil. It said the Kremlin should shift the focus of its anti-crisis programme to the poor because of"the threat of significant social pressure". The Bank added that aid to Russias poor might have theadded benefit of stimulating domestic demand. (30/03/2009)Russias poor need crisis help (BBC)Prime Minister Vladimir Putin said Russia would offer hundreds of millions of dollars to help its heavilyindebted biggest carmaker AvtoVAZ, with aid for other firms in trouble too. (30/03/2009) vvvvvvvvvvvPutin offers to pump money into maker of Lada cars (France24)South KoreaSouth Korea will urge the Group of 20 countries gathering in London to “roll back” all protectionistmeasures adopted since November and call for the World Trade Organisation to “name and shame”countries that erect barriers to trade or finance. (29/03/2009)S Korea seeks to halt protectionist drift (Financial Times) www.thinkingeurope.eu
  9. 9. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.UnitedcStatescPresident Barack Obama said that leaders of the G20 major global economies should send "a strongmessage of unity" on confronting the world financial crisis. The U.S. leader also said he saw signs ofimprovement in the slumping world economies, including areas of the American housing marketwhere the crisis began. Obama told that his objective for the G20 summit was to get the leaders totake a "robust approach to stimulus," deal with toxic assets in the financial system and agree onregulatory reform to keep such a crisis from occurring again. (30/03/2009)Obama seeks strong message of unity at G20 (Reuters)The White House says neither GM nor Chrysler submitted acceptable plans to receive more bailoutmoney, setting the stage for a crisis in Detroit and putting in motion what could be the final twomonths of two American auto giants. (30/03/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvObama denies bailout funds for automakers (CNBC)The White House on 29 March pushed out the chairman of General Motors and instructed Chrysler toform a partnership with the Italian automaker Fiat within 30 days as conditions for receiving anothermuch-needed round of government aid. (30/03/2009),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,U.S. lays down terms for auto bailout (International Herald Tribune)Three days after unveiling a plan to cleanse banks of their troubled loans and securities, America’streasury secretary was back in front of a congressional committee outlining proposals to extend thegovernment’s grip on the financial system. These would mark the biggest expansion of federalregulation since the 1930s.The new framework has four parts: containing systemic risks; protectingconsumers and investors; streamlining the regulatory structure; and international co-ordination.(26/03/2009)The Obama administration unveils core elements of its financial-regulation agenda (Economist)HIGHLIGHTSG20 SummitG20 leaders hope support for banks, higher spending and more money for the IMF will lift the worldeconomy out of recession by the end of 2010, according to a draft G20 communique. Stimulusmeasures already taken will raise global output by more than two percentage points and create morethan 20-million jobs worldwide, quoting from the draft. (29/03/2009)nnnnnnnnnnnnnnnnnnnnnnnnnG20 sees growth by end of 2010 (Mail&Guardian) www.thinkingeurope.eu
  10. 10. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.As delegates gather for the G20 summit in London on 2 April, it is worth looking to the last timeLondon hosted a world economic summit. In June 1933, delegates from 66 countries gathered inLondon to try and agree plans to revive the world economy in the midst of the Great Depression.(23/03/2009)Lesson for G20 from 1933 London summit (BBC)European Business SummitUp to 200,000 corporate insolvencies are expected in Europe this year, according to the EuropeanCommissions SME envoy, Françoise Le Bail, who said the reluctance of banks to lend to SMEs willforce thousands of viable companies out of business. Speaking at the European Business Summit inBrussels, where she addressed a workshop entitled SMEs in times of crisis: red tape or red carpet?,she said 19 EU member states had already launched recovery packages for the real economy whichwill directly benefit small companies. (30/03/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvCommission expects bankruptcy surge in 2009 (EurActiv)The European Commission said it will propose binding powers for new EU-wide supervisory authoritiesin its upcoming review of supervision rules for cross-border banks and insurance groups, expected inMay. But sensitive issues on how to deal with the collapse of a multinational group remain open, itemerged from debates at this years European Business Summit (EBS).(27/03/2009)bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbEU unveils details of financial supervision overhaul (EurActiv)FEB/Insead report wants public-private partnership to re-skill the EUs labour force. The nationalgovernments of the EU should agree a European skills pact to ensure that the Union has a sufficientlywell-educated workforce to respond to global challenges once the current economic crisis has passed,according to a report released today in Brussels at the European Business Summit. (26/03/2009)cccccReport calls for EU skills pact to prepare for post-crisis era (European Voice)EU SummitSummit approaches economic crisis from all fronts: financial market regulation, economic stimulus,job security. Leaders agreed to use €5bn in unspent EU funds to upgrade energy and internetconnections. And they raised the ceiling on EU aid to countries having difficulties. The credit line –which covers countries not using the euro – was lifted to €50bn. Leaders also pledged €75bn inadditional support to the International Monetary Fund to help countries in trouble. Wrapping up atwo-day summit, the leaders issued a joint statement saying the bloc had made “good progress” inimplementing the €200bn stimulus package adopted in December. Leaders expressed confidence themeasures – which include tax cuts and bank bailouts – would revive the economy but said it wouldtake time. www.thinkingeurope.eu
  11. 11. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.Looking ahead to the G20 summit on 2 April, leaders spelled out a common position on how toimprove regulation and oversight of the financial industry.Leaders also approved the development ofcloser ties with countries to the east. The Irish government updated EU leaders on its plans for a re-run of the Lisbon Treaty referendum.bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbPresidency Conclusions: download (pdf) (20/03/2009)ccccccccccccccccccccccccccccccccccccccccccccEU leaders confident and determined in face of economic crisis (European Commission)OUR COMPETITORS’ VIEWS ON FINANCIAL CRISISPSESocialist Euro MPs voiced concern that a European Commission draft proposal on Hedge Funds was"no more than window-dressing". Information leaked to the socialist group suggests the Commissionwill conclude fast track internal consultations on the proposal. European Parliament spokesman onHedge Funds Poul Nyrup Rasmussen said: "The proposal lacks rigorous content. In essence, HedgeFunds would simply have to register in the EU and could then compete freely without having to meetany extra condition. This is no more than window -dressing. It is completely unacceptable".(26/03/2009)Commission accused of "window-dressing" on hedge funds (PSE News)ALDE/ADLEPaolo Costa MEP (ALDE), Chairman of the European Parliament Committee on Transport, has beenappointed rapporteur on the EU common rules for the allocation of slots at European airports in viewof responding to the effects of the economic crisis on the aviation sector and to dramatic trafficreduction affecting almost all European airports and carriers. In this light, Paolo Costa MEP has starteda number of consultations with the main European stakeholders, including representatives fromairports, airlines, low cost carriers and national authorities in charge of allocating the slots.(26/03/2009)Paolo Costa appointed rapporteur on urgent measures (ALDE News)European Liberals and Democrats believe investment in transport, infrastructure and broadbandconnections will create jobs now, and prepare Europe for the future."We have made a pledge of moremoney for the IMF, a promise of more support for Europe’s most troubled economies and anagreement on moving ahead with European supervision of the financial system. I congratulate theCzech Presidency on that achievement" said ALDE Leader Graham Watson. (25/03/2009)xxxxxxxxEU Summit sets the tone for a common European line at the G20 meeting (ALDE News) www.thinkingeurope.eu
  12. 12. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.UENUEN Group proposed a resolution on the future of the car industry : 1. Considers that the current aidmeasures for the automotive industry could represent a serious and important opportunity to addresslong-term structural issues which still exist in the car industry; 2. Stresses that state economicintervention must at all times comply with EU state aid rules and the principles of the internal market;3. Reaffirms the necessity to maintain a high level of research and development investment, inparticular in the area of clean technologies; 4. Underlines the fact that since this global crisis affectsother world actors in the automotive sector, in particular the United States, a global solution requiresa permanent dialogue with third countries and the main EU trading partners; 5. Calls on theCommission to postpone conclusion of the free trade agreement between the European Union andSouth Korea until a balanced solution on the implications for the car sector is found; etc.(24/03/2009)cccccccccccccccccccUEN Group resolution on the future of the car industry (UEN Latest News)ccccccccccccccccccccccccccGreens/EFAGreen parties from across Europe have launched their campaign and manifesto for the 2009 Europeanelections in June, calling for a Green New Deal for Europe and accusing EU politicians of‘greenwashing their current, too-small stimulus packages. (30/03/2009)Europes Greens accuse EU of ‘greenwashing stimulus packages (EU Observer)During the Greens’ organised conference on A Green New Deal, professor Schmidt-Bleek made a clearcall for a new economy that functions within the laws of nature. For him, the current financial andecological crises stem from the same roots. (27/03/2009)cccccccccccccccccccccccccccccccccvvvvvvvvvA Green New Deal to tackle the triple crisis: A Greens/EFA conference (Greens News)GUE/NGLDuring a debate in the European Parliament speaking on behalf of the GUE/NGL group, Czech MEPVladimír Remek said "it is clear that ways out of the crisis need to be sought but confidence buildingand financial stability must be part of the deal." We have experienced a sharp rise in unemployment;this needs to be tackled urgently." MEP Remek said he was not in favour of providing financial supportto ailing companies. (25/03/2009)bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbJob creation and protection vital for the EUs post-crisis future (GUE News) www.thinkingeurope.eu
  13. 13. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 31/03/2009 To view full articles click on hyperlinks.UPCOMING EVENTSEvent: Meeting of G20 heads of states and governmentddddddddddddddddddddddddddddddDate: 2 April 2009, LondoncvcccccccccccccccccccccccccccccccccccccccccccccccccccccccEvent: EU Finance Ministers and Central Bank Governors in Prague for informal ECOFIN meetingDate: 3 - 4 April 2009, PragueThe meeting will be chaired by Czech Minister of Finance Miroslav Kalousek and also attended by CommissionersJoaquín Almunia and Charlie McCreevy, President of the European Central Bank Jean-Claude Trichet andPresident of the European Investment Bank Phillipe Maystadt. Minister Kalousek also invited a number of otherprominent guests, e.g. Jacques de Larosière, who is in charge of the High-Level Group on Financial Supervisionand the former Italian Minister of Finance and present President of the think-tank Notre Europe, TommasoPadoa-Schioppa.Editor:cRolandcFreudensteinffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffResearch Assistance: Katarína Králikovácccccccccccccccccccccccccccccccccccccc/ccccccccccccccccccccccDesign: José Luis FontalbacccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccQuestions and comments: briefs@thinkingeurope.eu www.thinkingeurope.eu
  14. 14. Centre For European Studies FINANCIAL CRISIS WATCHANNEXG20: ECONOMIC SNAPSHOTThe leaders of the Group of 20, or G20, of the worlds most powerful countries meet in London in April- and top of their agenda will be the global economic crisis.ARGENTINAOne of South Americas largest economies, Argentina was in economic difficulties even before theglobal downturn struck. Expansionary policies had caused the economy to overheat, fuelling inflation,while tax revenues shrank because the countrys farm exports were fetching lower prices on worldmarkets. The government responded to the fall in tax revenues by increasing taxation on agriculturalexports, a move that sparked continuing protests by farmers. President Cristina Fernandez, who cameto power in December 2007, nationalised the private pension system in November to help plug thehole in the governments finances. Previously privatised companies such as Aerolineas Argentinas havealso returned to state control.AUSTRALIAAustralia has experienced a long period of stable economic growth since its last recession in 1991,benefiting from the rise of China and India as markets for its raw materials. However, its resources-based economy has struggled since the worldwide financial turmoil began in the middle of 2008. Itsmining firms are cutting back on capital spending, reducing staff numbers and mothballing projects.The government of Prime Minister Kevin Rudd recently announced a 42bn Australian dollar ($26.5bn;£19bn) stimulus plan, as it seeks to shield the country from the global downturn. Mr Rudd has arguedthat the G20 alone has the global economic reach to tackle the world economic crisis. Mr Ruddcontinues to enjoy strong approval ratings over his handling of the economy, and is renowned for hisstrong work ethic, earning him the nickname Kevin 24/7.BRAZILLatin Americas biggest economy is also the worlds biggest exporter of products ranging from beefand chicken, to orange juice and coffee. But it has been hit by sharp falls in world commodity prices asthe global downturn curbs demand. Brazils currency and stock markets have also suffered, afterforeign investors sold off assets in order to cover losses back home. The financial turmoil has alreadyseen one big banking merger, between local giants Itau and Unibanco, and further consolidation maybe in prospect. Brazils government recently criticised the "Buy American" clause in the USs $787bn www.thinkingeurope.eu
  15. 15. Centre For European Studies FINANCIAL CRISIS WATCH(£563bn) economic stimulus package. Brazilian President Luiz Inacio Lula da Silva said the US and otherdeveloped countries should not turn to protectionism. And he hopes the G20 summit will lead to agreater role for developing countries in the world economy.CANADAThanks to the North American Free Trade Agreement (Nafta), Canadas economic health is closelylinked to that of the US, which buys three-quarters of its exports. The ailing car industry, for instance,is as big a problem for Ottawa as it is for Washington. As a result, Canada has copied many of the USgovernments tactics, such as cutting interest rates and drawing up stimulus packages, although withthe same lack of success. However, Canadas banking sector and housing market are in better shapethan in the US, with far fewer sub-prime mortgages. In February, the Canadian parliament passed a40bn Canadian dollar ($32bn; £23bn) economic stimulus package as part of the countrys annualbudget. The successful vote was, however, hard to come by for the Conservative government, asopposition parties said the original stimulus deal was insufficient, sparking a political crisis. The stormresulted in Prime Minister Stephen Harper suspending parliament for six weeks so his governmentcould revise the plans.CHINAThe global downturn failed to prevent China overtaking Germany as the worlds third-largesteconomy, but it has had serious consequences for the country, both internally and externally. Chineseexports have been hit hard by falling world demand, with millions of rural migrants returning to theirvillages after the factories that employed them closed down. Chinas waning appetite for rawmaterials has had a knock-on effect on other countries exports, crushing hopes that key emergingmarkets could compensate for the developed worlds slowdown. Its banks have not felt the impact likeelsewhere, but ordinary people have - with migrant workers especially hard hit. While Chinas growthremains relative strong compared to other countries, it has launched a $587bn stimulus package andhas underlined that it now has the largest deficit in twenty years. And China has recently been talkingabout the possibility of a new world currency to replace the dollar.FRANCEUnlike most other G20 countries, France has already seen social unrest in response to the globaldownturn. In January, millions of French workers in both public and private sectors took industrialaction in protest at the governments handling of the economic crisis. The government has sinceannounced a 26bn-euro ($33.1bn; £23.5bn) initiative designed to revitalise the economy. While Francehas not officially entered a recession, there are expectations that it will do so in 2009. Its trade deficithit a record 55.7bn euros ($71.4bn; £48.6bn) in 2008. President Nicolas Sarkozy has won domesticplaudits for his plans to offer financial support for French industry, most notably the countryscarmakers. However, this has angered other European governments, who accuse him ofprotectionism. www.thinkingeurope.eu
  16. 16. Centre For European Studies FINANCIAL CRISIS WATCHGERMANYGermanys economy, which accounts for about a third of eurozone output, is set for a grim year. Thegovernment has predicted that the economy will shrink by 2.25% in 2009, which would be its worstperformance in the post-World War II era. The news has come as a shock to many Germans, whoprided themselves on their fiscal rectitude, unlike the free-spending, highly-indebted British andAmericans. However, Germanys export-led economy has been relying on demand in other countries,which has now dried up because of the global slowdown. In February, the country approved a 50bneuro ($63bn, £44bn) stimulus plan, and Chancellor Angela Merkel said Germany would emerge fromthe economic crisis stronger than when it entered it. "We are operating on the principle that Germanyis strong and therefore can come to terms with this difficult economic situation," she said. However,Mrs Merkel has warned other countries not to expect Germany to reflate its economy further before itsees how the initial stimulus package has worked.INDIAIndias economy has undoubtedly been affected by the global recession. The most recent officialfigures showed that its economy grew by less than expected in the last three months of 2008. Thecountrys gross domestic product (GDP) grew by 5.3% between October and December, comparedwith 7.6% in the previous three months, and 8.9% in the same period a year earlier. Agriculture, whichmakes up about a fifth of the economy was one of the sectors to see growth fall, while industrial firmssuch as Tata have been severely affected by the freeze in world credit markets and general fall inglobal spending. The Congress-led government of Prime Minister Manmohan Singh now faces ageneral election, starting on 16 April. It is hoping that pledged to waive farm loans and a ruralemployment guarantee scheme will help it win a second term in power. India is worried that without aglobal stimulus plan at the G20, its economic boom may be over.INDONESIAGlobalisation has been a significant economic benefit for Indonesia in recent years. Thanks in no smallpart to a big growth in manufacturing facilities for major multinationals, its economy grew 6.1% in2008. However, with Western firms cutting back production towards the end of the year, Indonesiasexports dropped sharply in the final three months of the year. To help lift the economy, thegovernment of President Susilo Bambang Yudhoyono has passed a $6bn (£4.3bn) fiscal stimulus. Butwith overseas debts estimated at $151.7bn, the government has its own financial woes. Critics also sayit isnt doing enough to stamp out corruption that continues to deter some would-be investors.ITALYThe Italian economy, the third-largest in the eurozone, was one of the first to enter recession. Itseconomy has now shrunk for three quarters in succession: in the final three months of 2008, itdeclined by 1.8%, following previous contractions of 0.5% and 0.4%. It was also one of the first toapprove a stimulus programme. In November, the government of Prime Minister Silvio Berlusconi www.thinkingeurope.eu
  17. 17. Centre For European Studies FINANCIAL CRISIS WATCHapproved an 80bn euro ($102bn; £66bn) emergency package that included tax breaks for poorerfamilies, public works projects and mortgage relief. Italy has the worlds third-highest debt burden,expected to top 110% of GDP this year.JAPANBy the Japanese governments own admission, it is facing the worst economic crisis since the end ofWorld War II. The slowdown in the worlds second-biggest economy is steeper than that beingexperienced in the US or Europe, as Japan has been hit particularly hard by falling global demand forits products, particularly electronic equipment and cars. Consumers have cut back too, alarmed byrising unemployment. The economy contracted by 3.3% in the last three months of 2008, its worstshowing since the oil crisis of the 1970s. And in January its exports plunged 45.7% to a 10-year low.Prime Minister Taro Aso is now pushing to introduce a stimulus package, but commentators said he isbeing hampered by his growing unpopularity within his own party.MEXICOThe Mexican economy is so intertwined with that of the US that when Wall Street sneezes, Mexicanfirms can find themselves in intensive care. Under the North American Free Trade Agreement (Nafta),the proportion of Mexicos exports heading for the US has grown to 85%, leaving the countryvulnerable to falling US demand. Mexico also thrives on remittances from workers who have migratedto the US, but these have fallen for the first time since records began in 1995. In January, thousandsattended a rally in Mexico City to protest at the economic policies of President Felipe Calderonsgovernment.RUSSIARussias economy is reeling from the effect of a sharp fall in the price of oil. The 2009 budget isexpected to slip into deficit and analysts predict that the country is heading for its first recession since1998. Russias stock markets have plunged in recent months and the central bank has spent billions ofdollars trying to support the rouble. The country has also seen unemployment rise sharply recently.Social unrest has already been broken out in Vladivostok, while the financial crisis has cut thecombined fortune of the 10 richest Russians by 66% to $75.9bn, according to business magazineFinans. Overseas investment in the country is also being deterred by the perception that state-runfirms bully or intimidate foreign companies into handing over control of their investments. There isalso widespread cynicism as to how much President Dmitry Medvedev is really in control, and whetherpower really lies with Prime Minister and former President Vladimir Putin.SAUDIcARABIAThe Saudi kingdom is the only G20 country that also belongs to oil producers cartel Opec (Indonesiaallowed its membership to lapse at the end of 2008). The global downturn has led to lower demandfor energy, further depressing world oil prices, despite Opecs attempts to cut output. As a result, theInternational Monetary Fund predicts that Saudi Arabia and its neighbours will record fiscal deficits of www.thinkingeurope.eu
  18. 18. Centre For European Studies FINANCIAL CRISIS WATCHup to 3.1% of GDP in 2009, a marked decline from surpluses of 22.8% of GDP in 2008. King Abdullahrecently replaced the countrys central bank chief in a rare reshuffle.SOUTHcAFRICASouth Africa has the continents biggest economy and is the only African member of the G20. Thecountry has already been hit by the global recession, its economy contracting for the first time in 10years in the last three months of 2008. Between October and December it shrank 1.8% from theprevious quarter. Like Brazil, it fears that the global downturn will lead to a rise in protectionism in richnations, making it even harder for developing countries to gain a foothold in key markets andincreasing their sense of economic isolation. South Africas finance minister Trevor Manuel told theWorld Economic Forum in Davos in January that Africa was "at risk of decoupling, derailment andabandonment together". The African National Congress government of President Kgalema Motlanthecontinues to face tough challenges in alleviating poverty and reducing crime levels. The country goesto the polls on 22 April.SOUTHdKOREAThe government in Seoul, like its neighbours in the region, fears that the global slowdown could leadto a repeat of the 1997-98 Asian economic crisis. South Koreas economy shrank by 3.4% in the lastquarter of 2008 compared with the year before, while President Lee Myung-bak has warned that hiscountry faces an "economic emergency". In response, the government has announced a stimuluspackage worth 14 trillion won ($10.9bn; £6.6bn) to boost the economy, with eleven trillion won aimedat public projects and three trillion won for tax cuts to encourage spending. Meanwhile, interest rateshave fallen to record lows.TURKEYAs it tries to revive its EU membership bid, Turkey has been talking up its response to the downturn asevidence that its reactions are those of a developed country, not an emerging market. In the pastthree months, the central bank has cut interest rates by 3.75 percentage points, although the rateremains high by world standards at 13%. However, the Turkish lira fell 25% against the dollar in 2008,while industrial output fell 19% in December. Loan talks with the International Monetary Fund weresuspended in January after disagreements over the terms. As well as trying to reduce unemploymentlevels from the current 12%, the government of Tayyip Erdogan has had to face constant suspicion ofits Islamist routes, in a country where the secular and religious are often divided.UNITEDcKINGDOMThe International Monetary Fund expects the UK to suffer the worst contraction among advancednations in 2009, with its economy predicted to shrink by 2.8%. The Bank of England has already cutinterest rates to just 0.5% in a bid to help the British economy out of recession, while unemploymentis now over 2 million - the highest level since 1997. It has also begun a programme of quantitativeeasing to pump more funds into the economy by purchasing government bonds. Troubles in the www.thinkingeurope.eu
  19. 19. Centre For European Studies FINANCIAL CRISIS WATCHbanking sector have led the government to bail out some of the countrys biggest financial institutions,including Royal Bank of Scotland, in which it now holds a 68% stake. Recently, the governor of theBank of England warned that the UK economy could not afford another stimulus package, with thegovernment deficit set to soar to 11% of GDP.UNITEDcSTATESThe global economic turmoil began in the US, thanks to the sub-prime mortgage crisis in whichunderperforming home loans were repackaged and sold on as toxic debt. The Federal Reserve has cutinterest rates to near zero in a bid to unfreeze the credit markets, while new Treasury SecretaryTimothy Geithner has announced a partnership with the private sector to purchase toxic assets, inorder to get them off the banks balance sheets. President Barack Obama has signed into law aslimmed-down economic stimulus plan worth $787bn (£563bn), but problems in the wider economyare worsening, with unemployment at its highest since 1992. The government has also announcednew plans for tougher financial regulation, including international oversight. But President Obama hasmade it clear that he expects other countries to join the US in doing the heavy lifting of pulling theworld economy out of recession.EUROPEANcUNIONSixteen of the 27 European Union countries share the euro as their common currency. Their individualeconomic performances vary considerably, but the eurozone as a whole has been in recession sinceSeptember 2008 and is forecast to shrink by 1.9% in 2009.Unemployment in the euro area is expected to exceed 10% in 2010, up from 7.5% in 2008. Theeurozones key interest rate is now at 2%, its lowest level since December 2005. The worst performingEU economy is Latvia, which does not belong to the eurozone. Latvian GDP could fall by as much as10% this year. <<Source: BBC: Special Report >> www.thinkingeurope.eu

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