US, Europe, China unveil a series of stimulus measures

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From Fazle Rashid
NEW YORK, Nov 27: In the space of 24 hours, three major players of the global economy -- the US, Europe and China -- unveiled a series of stimulus measures to conquer the ravages of an unrelenting downturn in growth.
A day after Washington unveiled $800 billion in new programmes to tame the financial crisis that has radiated around the world, China announced its largest interest rate-cut in more than a decade and the European Union (EU) outlined a 200 billion euro wish-list of measures for Europe to spend its way out of recession, the New York Times (NYT) reported today.
Consumer spending, the principal driving force of the US economy or, for that matter, any economy, fell a full percentage point in October, the biggest single month decline since 2001. The shopping season in the US begins from tomorrow, the day after the Thanksgiving celebration. The retailers are facing the uneasy prospect of low demand and overstocked inventories. Many retailers are offering upto 50 per cent rebates in many items.
Consumers are cutting expenses in the face of weakening employment picture. They are either delaying or cancelling purchases. The drop in spending will severely injure nation's economic growth. There was a sign to rejoice. The number of applications seeking unemployment benefits has fallen.
The access to the loans for students, auto loans, credit card debt and small businesses is becoming tighter. The lenders for all kinds of loans have raised their standard as customers credit records are deteriorating because of delinquencies in repayment.
Some are even suspecting the programme may not get off the ground at all. The intention was to unlock the frozen credit market. The plan was to keep the credit flowing freely from lenders to borrowers. This has not happened. Even banks receiving huge infusion of cash from the government are wary of providing loans.
Foreign banks operating in the US are putting pressure on the Treasury Department to provide them with the same tax-breaks as were recently given to their American counterparts under the $700 billion rescue package. The foreign banks are saying that the two tax-breaks whose benefits are estimated to total hundreds of billions of dollars should apply to them also because their American operations involved the same mortgage-related issues.
UBS, the Swiss bank, Deutsche Bank of Germany, Credit Suisse of France, Royal Bank of Canada and HSBC of England seeking tax-breaks cited the US law that prevent discriminations. Foreign banks occupy one fourth of the total American banking market.
The economic stimulus package announced by EU is to bolster growth and employment in its 27 member-countries. The EU said the downturn in the bloc has deepened as the US and Asian economies have worsened. The 15 nations that have adopted euro as their currency are already in recession. Exceptional times call for exceptional measures, NYT quoted Jose Manuel Barroso, commission president as saying. 'Jobs and well-being of our citizens are at stake', he said.
President of France Nicolas Sarkozy plans to introduce what he called a massive stimulus package in the coming week. Germany, bloc's largest economy, warned that excessive government obligations could create unintended consequences. 'We should not get into a race for billion', Angela Merkel, the German chancellor said.
Japan which always boasted of a robust economy has officially slipped into recession hurt by weak export, steep cuts in corporate spending and drop in revenue earnings.
China which has witnessed uninterrupted double digit growth rate for past several years, is facing a downturn.
Kader Group, Hong Kong's best known toy company axed more than 500 workers as business fell alarmingly. The enraged workers destroyed the computers and took away cash from the shop. China's central bank has cut the bench-mark lending rate three times in two months to rekindle the economy. The central bank also reduced by two percentage points the reserve requirement to enable the banks to lend more of their assets to the consumers and businesses.