Global rescues, guarantees now at US$5t

Published on The Brunei Times (http://www.bt.com.bn/en)
Global rescues, guarantees now at US$5t


Catty: Demonstrators dressed as British Prime Minister Gordon Brown (R) and a 'City fat cat' pose for pictures outside the Bank of England in London, yesterday. Picture: AFP
LONDON/PARIS

Tuesday, November 11, 2008

GOVERNMENTS worldwide have committed between US$4 trillion and US$5 trillion for bank bailouts, credit guarantees and fiscal spending to contain the damage from the worst financial turmoil in 80 years.

But new data showed the global economic crisis remains unabated with the French and Italian economies hurtling towards recession. The economic gloom also appears to be sweeping through Japan and several emerging nations.

Rating agency Fitch cut Romania's credit rating to "junk" status in one of four emerging market downgrades and said the global financial crisis had put the ratings of South Korea, South Africa, Russia and Mexico in jeopardy.

Foreign investors have dumped east European assets, fearing that many in the region may not be able to handle large foreign debt burdens.

Several nations, including Iceland, Hungary and Ukraine, have sought help from the International Monetary Fund. Fitch also cut the ratings of Bulgaria, Kazakhstan and Hungary.

In Asia, Japanese manufacturers suffered their biggest quarterly slump in machinery orders in a decade, official data showed, boding ill for capital investment as the economy teeters on the brink of recession

Even fast-growing China has not proved immune.

Beijing approved a 4 trillion yuan (US$586 billion) government spending package to boost domestic demand and help the world's fourth-largest economy ride out the crisis.

China's stimulus comes on top of more than US$4 trillion in government pledges around the world for bank bailouts, credit guarantees and fiscal spending.

The United States, where a housing market collapse triggered the crisis, has earmarked US$700 billion for bank bailouts.

President-elect Barack Obama is expected to spend hundreds of billions of dollars more in a fiscal stimulus package, once he takes power in January.

Jean-Claude Juncker, chairman of the Eurogroup of euro zone finance ministers, said European banks had not resumed lending as much as leaders had hoped when they launched measures to shore up the financial system.

"They are reacting, yes, but they are not reacting with the drive that we were imagining when we had the support plans," said Juncker, who is also prime minister of Luxembourg.Reuters, AFP