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EuroWire – March 2009
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Euro ire – January 2 06
Transat lant ic
Cable
fiscal-stimulus plans for the European region will total only
around 0.8% of GDP this year and 0.6% in 2010. This amounts
to less than half the US package. In the strange calculus
of emergency economic policy, improvement will require
conditions first to worsen.
“Not all European countries have responded with enthusiasm,”
Mr Boone said in January. “If we get more bad economic news,
then we can anticipate larger stimulus packages later in the
year.”
Another economist warned of the danger of procrastination.
“We’re facing a more pervasive, more widespread downturn
in the global economy than ever before,” said Allen Sinai, chief
global economist at Decision Economics, in New York. “It cries
out for other countries to stimulate their economies, and
stimulate them strongly, rather than to rely on a US upturn to
recover.”
❈
Mr Miller made the necessary point that, no matter
how much is done by governments, it will not generate a lasting
recovery unless companies, banks, and consumers also pitch
in. Peter Hooper, a former Federal Reserve official, now chief
economist at Deutsche Bank Securities in New York, told him,
“Fiscal expansion can’t be the answer forever. You need to get
private spending going again. You need to get the financial
sector working again.”
This is more easily said than done. The free-spending American
consumer has, virtually overnight, turned pinchpenny. US retail
sales fell for the sixth-straight month in December, for the
longest decline in records going back to 1992. More ominous –
for the consumer and for Mr Obama’s economic recovery plan –
is the reluctance of some banks to ply their trade. Saved by an
infusion of public money intended to keep them doing business,
they are rejecting even well qualified prospective borrowers.
The phenomenon of bankers skittish of banking may be with
us for a while. Jamie Dimon is the CEO of JP Morgan Chase &
Company. On 15
th
January, after the second-biggest US bank by
assets reported a 76% drop in profit for 2008, he told reporters,
“We’ve got what looks like maybe one of the worst recessions
in a long time. Everyone is struggling with this extreme
environment.”
To help secure its rescue by the US
government, Chrysler puts together
a mutual assistance pact with Italy’s Fiat
Up against a 31
st
March deadline for proving its viability to the
satisfaction of Washington, Chrysler in late January was working
through the details of a proposed alliance with Fiat, of Italy, that
held considerable attraction for both parties. The deal would
mean much lower development costs for the struggling US
automaker by giving it access to Fiat’s fuel-efficient small car
technology. The Italian company, at no cost to itself, would gain
a 35% stake in Chrysler and a sales foothold in the United States.
Automotive