EoW March 2009

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.” ❈

Automotive

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.

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EuroWire – March 2009 Euro ire – January 2 06