Financial Crisis Watch 1 April 2009

Centre For European Studies
FINANCIAL CRISIS WATCH
Last updated on 31/03/2009 To view full articles click on hyperlinks.

CONTENTS

FOREWORD BY CES HEAD OF RESEARCH

FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATES

FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDE

HIGHLIGHTS

OUR COMPETITORS’ VIEWS ON FINANCIAL CRISIS

UPCOMING EVENTS

ANNEX

www.thinkingeurope.eu


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 new
transatlantic harmony, the US and the EU have found a new field for controversy: The question of how
much stimulus is enough to shorten the depression and bring about recovery as fast as possible. Nobel
Prize 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, and
would risk losing a whole decade through stagnation, like Japan in the 1990s. There were two kinds of
European reactions to this rhetoric from across the Atlantic: One was rather blunt and a bit angry, like
acting Czech Prime Minister Mirek Topolanek’s statement that President Obama’s rescue plan is the “road
to hell” – though, of course, Mr Topolanek may have been angry about a few other things, too, like his
losing a confidence vote in the middle of an EU presidency. But even so this language stands out from the
majority 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 social
security systems than the US. These amount to a broad-based stimulus package in themselves: They
maintain, or recreate, purchasing power where it is most needed in depression-stricken economies - among
the newly unemployed and those threatened by unemployment. Seen in that context, the transatlantic gap
in 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 much
borrowing now could exacerbate a future situation which the US, with their much more favorable
demographic 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 the
optimal distribution of stimuli over time: Many EU politicians, including the German government, but also
Commission President Barroso, keep repeating that we should wait to see how the recently enacted stimuli
actually work, before we engage in new massive borrowing and spending. The Washington majority view
on 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.



FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATES
Bulgaria
One of the government's 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 to
reduce their working hours by half, i.e. to four hours a week, because of the lack of orders for their
produce or services. (29/03/2009)
The government's 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 a
marked 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 by
46,2%. The turnover lowered from BGN 159,7 M, for the third quarter of 2008, to BGN 85,9 M, for the
October-December period. (24/03/2009)cccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Bulgaria chemical industry collapses over Global Financial Crisis (Sofia Novinite)

Czech Republic
The European Union's Czech presidency blasted US plans to spend hundreds of billions of dollars to
revive 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 world's biggest economy. (26/03/2009)xxxxxxxxxxxxxxxxxx
EU presidency blasts US recovery plans as 'way to hell' (EUbusiness)

France
French Prime Minister Francois Fillon has unveiled stringent restrictions on stock options and other
executive perks for companies that have been bailed out by the state. Fillon announced that
executives 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)ccccccccccccccccccccccccccccccc
French PM announces bonus bans on bailed-out companies (France24)

France's Renault is to shift part of its production from abroad to near Paris after receiving state aid in
exchange for a promise not to shut French plants or axe French jobs, a minister said. Renault last
month said its net profits collapsed by 78 percent in 2008 amid a dramatic drop in global demand for
cars following the credit crunch. Sales fell 30 percent in the fourth quarter and seven percent for 2008
as a whole. (20/03/2009)cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Renault will move car line to France after state aid (EUbusiness)



Germany
The head of Germany’s powerful BDI industry federation launched a vitriolic attack on the US fiscal
stimulus, saying aid to the motor industry amounted to a “car war” that could distort competition to
the detriment of Europe. (31/03/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
German industry chief hits out at US stimulus (Financial Times)

Greece
The Greek residential real estate market has been one of the first victims of deteriorating economic
conditions. 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 estate
experts, house prices have been on a slightly downward trend since the beginning of the year as the
number of transactions also drop. (31/03/2009)cccccccccccccccccccccccccccccccccccccccccccccccccccc
Residential housing market up against unfavorable factors (Kathimerini)

Greece’s economy is seen slipping into recession this year, according to the International Monetary
Fund (IMF) which is expected to lower its expectations for the country’s economic performance in its
next outlook due in April. The IMF had forecast that Greece’s economy will expand at an annual pace
of 0.5 percent in last month’s projections, but has since revised down its expectations for global
growth. Meanwhile, officials from ratings agency Fitch Ratings are expected to visit Athens to assess
the state of the economy and Greece’s ability to service its large public debt. (30/03/2009)
IMF sees recession in outlook (Kathimerini)

Hungary
Gordon 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 the
new leader may get less than a year to do his job. He is expected to announce spending cuts, which
could include dramatic cutbacks to Hungary’s generous social safety net. (30/03/2009)ccccccccccccccc
Hungary faces ‘painful crisis management’ (Financial Times)

Italy
The head of Italian auto giant Fiat slammed state aid given to the car industry in Britain, France and
Sweden, saying it was "very dangerous" and hurt competition in the sector."The aid should either go
to everyone or to no-one," he added. Italy has also moved to help its car industry but only through a
bonus for people trading in their old vehicle to buy a new one. Fiat, Italy's largest private employer,
saw sales fall 20 percent in the fourth quarter of 2008 and has announced a string of temporary
layoffs. (28/03/2009)xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Fiat chief slams Europe state aid (EUbusiness)



Latvia
Latvian Prime Minister Valdis Dombrovskis ruled out a devaluation of the national currency, describing
the issue as a "stumbling block" with the International Monetary Fund. "The International Monetary
Fund has no objection to a devaluation of the lat, but the European Commission, Bank of Latvia and
the 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 the
country’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 to
include massive cuts across the entire public sector. (25/03/2009)cccccccccccccccccccccccccccccccccc
Latvia’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-euro
bailout it secured last year, Latvia's 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. The
loans were required to tackle its yawning budget deficit and troubled banking sector. (24/03/2009)ccc
Latvia may need new bailout (Eubusiness)

The Netherlands
Dutch Prime Minister Jan Peter Balkenende unveiled a 6.0-billion-euro (8.1-billion-dollar) stimulus plan
for 2009 and 2010, but warned of cost-cutting from 2011 to bring down deficits. The plan includes
investment for road construction, the abolition of a tax on air travel, funding for renewable energies
and measures against youth unemployment. (25/03/2009)ccccccccccccccccccccccc
Dutch PM unveils six-bln-euro stimulus plan (EUbusiness)

Poland
Poland appears to be weathering the severe slump in the world economy better than many other
countries, especially in eastern Europe. Its economy grew by 2.9% year on year in the fourth quarter of
2008, which—although well below an average growth rate of 6.3% in the previous ten quarters—was
in line with results in Slovakia and Romania. Furthermore, Poland's performance compared very
favourably with that of the Czech Republic (0.2%), Slovenia (-0.8%) and Hungary (-2.3%), and far
outshone that of the Baltic states, some of which experienced a double-digit annual fall in output.
(30/03/2009)
Complacent in Poland (Economist)



Romania
The International Monetary Fund (IMF) and other lenders have agreed in principle to provide Romania
20bn euros in aid. The IMF will lend 12.95bn euros, the European Union will provide 5bn euros and
the 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 been
agreed by its staff mission, but needs approval from the executive board and management. Similarly
the World Bank needs to agree its part of the deal and the European Commission must approve its
contribution. (25/03/2009) vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
Romania gets IMF emergency loan (BBC)

Slovakia
Under the influence of the global economic crisis, the general business climate has significantly
worsened in countries such as Slovakia and this is expected to be reflected in the telecommunications
sector. According to an analysis conducted by Deloitte Slovensko, a slowing in the growth of telecom
revenues is expected for 2009 in comparison to the 3.7 percent overall growth of the Slovak
telecommunications market and the 5.3 percent growth of its mobile services segment recorded in
2008. (23/03/2009)
Economic downturn expected to hit the telecom sector (Slovak Spectator)

Spain
Spain’s consumer price index appears to have contracted in March compared with the same period
last year, fuelling fears that the recession-hit country could be entering a deflationary cycle. The
National Statistics Institute said that a preliminary indicator showed that inflation had slowed to a
negative 0.1 per cent for the month, down from a 0.7 per cent increase in March last year. It was the
first contraction in prices since the current method of calculation was introduced in 1997.
(30/03/2009)
Deflation fears grow in Spain (Financial Times)

Spain's decision to rescue a regional savings bank has sent financial stocks in the country lower. The
Bank of Spain is to take over Caja Castilla la Mancha in the first bank bail-out in Spain since the global
financial crisis began. The government will also back the bank with 9bn euros in guarantees. Shares in
banking giants Santander and BBVA declined on concern over the health of the banks in Spain, where
the 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 another
stimulus is needed later this year, José Luis Rodríguez Zapatero, prime minister, said on 26 March. He
acknowledged that such a fiscal stimulus would have to be better co-ordinated, more modest and
more focused than the previously announced stimulus packages that are draining the coffers of most
of the world’s big economies. (26/03/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccccc
Zapatero favours ‘green’ stimulus (Financial Times)




The European Commission gave its approval to the plans of Spanish authorities to grant 800 million
euros in public aid to the textile and clothing sector. (24/03/2009)xxxxxxxxxccccccccccccccccccxxxxxx
EU approves EUR 800m state aid for Spanish textile sector (EUbusiness) cccccc

Sweden
Swedish protested on 26 February against the threat of job cuts at the Saab factory there. The loss of
750 jobs was announced two weeks later. Saab Automobile may be just another crisis-ridden car
company in an industry full of them. But just as the fortunes of Flint, Mich., are permanently
entangled with General Motors, so it is impossible to find anyone in this city in southwest Sweden who
is not somehow connected to Saab. (22/03/2009)cccccccccccccccccccccccccccccccccccccccccccccccccc
Sweden says no to saving Saab (International Herald Tribune)

UnitedcKingdom
The number of new cars produced in the UK fell by a record 59% in February, year-on-year, as the
motor industry continues to suffer from weak demand. Many major manufacturers have been forced
to suspend or cut production in the face of falling sales. The size of the drop has led to renewed calls
for more government help. However a row over protectionism has broken out after Renault's decision
to move production back to France from Slovenia, prompted by government aid. (20/03/2009)ccccccc
UK car production in record drop (BBC)

Europe and the United States should work closer together as "an unstoppable progressive
partnership" to help pull the world out of its financial and economic malaise, British Prime Minister
Gordon Brown. Addressing the European Parliament in Strasbourg, France, Brown called for more
regulation of the financial markets and more stimulus of world economies in a coordinated fashion.
(24/03/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Brown calls for EU-US cooperation on economic crisis (EUbusiness)

FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDE

China
China's central bank has called for a new global reserve currency run by the International Monetary
Fund to replace the US dollar. Central bank governor Zhou Xiaochuan did not explicitly mention the
dollar, but said the crisis showed the dangers of relying on one currency. With the world's largest
currency reserves of $2tn, China is the biggest holder of dollar assets. Its leaders have often
complained about the dollar's volatility. (24/03/2009)ccccccccccccccccccccccccccccccccccccccccccc
China suggests switch from dollar (BBC)



China has increased the pressure on world leaders just days before the G20 world summit by calling
for an overhaul of the global financial system. Chinese officials want a new global reserve currency and
reforms of international financial institutions to give developing nations more power. (24/03/2009)
China presses G20 reform plans (BBC)

Japan
Japanese unemployment rose to 4.4 percent in February, up from 4.1 percent the previous month, as
firms cut jobs and close factories to cope with the deepening recession. (31/03/2009)xxxxxxxxxxxxxxx
Jobless rate rises to 4.4 percent (France24)

Japan's exports saw a record plunge in February, falling by nearly half compared with a year earlier,
according to the country's finance ministry. Exports fell 49.4% year-on-year to 3.526tn yen ($36bn;
£24.6bn), though this was in line with forecasts. The world's second-largest economy is suffering in
the downturn as demand for its products has collapsed. (25/03/2009)ccccccccccccccccccccccccccccccc
Japan's February exports halved (BBC)

Russia
Russia's economy will shrink by 4.5% this year because of the global downturn, the World Bank has
predicted. The Bank said Russia, a major oil producer, would be particularly hard hit by the low price
of 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 Russia's poor might have the
added benefit of stimulating domestic demand. (30/03/2009)
Russia's poor 'need crisis help' (BBC)

Prime Minister Vladimir Putin said Russia would offer hundreds of millions of dollars to help its heavily
indebted biggest carmaker AvtoVAZ, with aid for other firms in trouble too. (30/03/2009) vvvvvvvvvvv
Putin offers to pump money into maker of Lada cars (France24)

South Korea
South Korea will urge the Group of 20 countries gathering in London to “roll back” all protectionist
measures 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)



UnitedcStatesc
President Barack Obama said that leaders of the G20 major global economies should send "a strong
message of unity" on confronting the world financial crisis. The U.S. leader also said he saw signs of
improvement in the slumping world economies, including areas of the American housing market
where the crisis began. Obama told that his objective for the G20 summit was to get the leaders to
take a "robust approach to stimulus," deal with toxic assets in the financial system and agree on
regulatory 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 bailout
money, setting the stage for a crisis in Detroit and putting in motion what could be the final two
months of two American auto giants. (30/03/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
Obama denies bailout funds for automakers (CNBC)

The White House on 29 March pushed out the chairman of General Motors and instructed Chrysler to
form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another
much-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’s
treasury secretary was back in front of a congressional committee outlining proposals to extend the
government’s grip on the financial system. These would mark the biggest expansion of federal
regulation since the 1930s.The new framework has four parts: containing systemic risks; protecting
consumers 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)

HIGHLIGHTS
G20 Summit

G20 leaders hope support for banks, higher spending and more money for the IMF will lift the world
economy out of recession by the end of 2010, according to a draft G20 communique. Stimulus
measures already taken will raise global output by more than two percentage points and create more
than 20-million jobs worldwide, quoting from the draft. (29/03/2009)nnnnnnnnnnnnnnnnnnnnnnnnn
G20 sees growth by end of 2010 (Mail&Guardian)



As delegates gather for the G20 summit in London on 2 April, it is worth looking to the last time
London hosted a world economic summit. In June 1933, delegates from 66 countries gathered in
London 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 Summit

Up to 200,000 corporate insolvencies are expected in Europe this year, according to the European
Commission's SME envoy, Françoise Le Bail, who said the reluctance of banks to lend to SMEs will
force thousands of viable companies out of business. Speaking at the European Business Summit in
Brussels, 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 which
will directly benefit small companies. (30/03/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
Commission expects bankruptcy surge in 2009 (EurActiv)

The European Commission said it will propose binding powers for new EU-wide supervisory authorities
in its upcoming review of supervision rules for cross-border banks and insurance groups, expected in
May. But sensitive issues on how to deal with the collapse of a multinational group remain open, it
emerged from debates at this year's European Business Summit (EBS).
(27/03/2009)bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb
EU unveils details of financial supervision overhaul (EurActiv)

FEB/Insead report wants public-private partnership to re-skill the EU's labour force. The national
governments of the EU should agree a European skills pact to ensure that the Union has a sufficiently
well-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)ccccc
Report calls for EU skills pact to prepare for post-crisis era (European Voice)

EU Summit

Summit 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 internet
connections. 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 in
additional support to the International Monetary Fund to help countries in trouble. Wrapping up a
two-day summit, the leaders issued a joint statement saying the bloc had made “good progress” in
implementing the €200bn stimulus package adopted in December. Leaders expressed confidence the
measures – which include tax cuts and bank bailouts – would revive the economy but said it would
take time.



Looking ahead to the G20 summit on 2 April, leaders spelled out a common position on how to
improve regulation and oversight of the financial industry.Leaders also approved the development of
closer ties with countries to the east. The Irish government updated EU leaders on its plans for a re-
run of the Lisbon Treaty referendum.bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb
Presidency Conclusions: download (pdf) (20/03/2009)cccccccccccccccccccccccccccccccccccccccccccc
EU leaders confident and determined in face of economic crisis (European Commission)

OUR COMPETITORS’ VIEWS ON FINANCIAL CRISIS
PSE
Socialist 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 Commission
will conclude fast track internal consultations on the proposal. European Parliament spokesman on
Hedge Funds Poul Nyrup Rasmussen said: "The proposal lacks rigorous content. In essence, Hedge
Funds would simply have to register in the EU and could then compete freely without having to meet
any 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/ADLE
Paolo Costa MEP (ALDE), Chairman of the European Parliament Committee on Transport, has been
appointed rapporteur on the EU common rules for the allocation of slots at European airports in view
of responding to the effects of the economic crisis on the aviation sector and to dramatic traffic
reduction affecting almost all European airports and carriers. In this light, Paolo Costa MEP has started
a number of consultations with the main European stakeholders, including representatives from
airports, 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 broadband
connections will create jobs now, and prepare Europe for the future."We have made a pledge of more
money for the IMF, a promise of more support for Europe’s most troubled economies and an
agreement on moving ahead with European supervision of the financial system. I congratulate the
Czech Presidency on that achievement" said ALDE Leader Graham Watson. (25/03/2009)xxxxxxxx
EU Summit sets the tone for a common European line at the G20 meeting (ALDE News)



UEN
UEN Group proposed a resolution on the future of the car industry : 1. Considers that the current aid
measures for the automotive industry could represent a serious and important opportunity to address
long-term structural issues which still exist in the car industry; 2. Stresses that state economic
intervention 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, in
particular in the area of clean technologies; 4. Underlines the fact that since this global crisis affects
other world actors in the automotive sector, in particular the United States, a global solution requires
a permanent dialogue with third countries and the main EU trading partners; 5. Calls on the
Commission to postpone conclusion of the free trade agreement between the European Union and
South Korea until a balanced solution on the implications for the car sector is found; etc.
(24/03/2009)ccccccccccccccccccc
UEN Group resolution on the future of the car industry (UEN Latest News)cccccccccccccccccccccccccc

Greens/EFA
Green parties from across Europe have launched their campaign and manifesto for the 2009 European
elections 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)
Europe's Greens accuse EU of ‘greenwashing' stimulus packages (EU Observer)

During the Greens’ organised conference on A Green New Deal, professor Schmidt-Bleek made a clear
call for a new economy that functions within the laws of nature. For him, the current financial and
ecological crises stem from the same roots. (27/03/2009)cccccccccccccccccccccccccccccccccvvvvvvvvv
A Green New Deal to tackle the triple crisis: A Greens/EFA conference (Greens News)

GUE/NGL
During a debate in the European Parliament speaking on behalf of the GUE/NGL group, Czech MEP
Vladimír Remek said "it is clear that ways out of the crisis need to be sought but confidence building
and 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 support
to ailing companies. (25/03/2009)bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb
Job creation and protection vital for the EU's post-crisis future (GUE News)



UPCOMING EVENTS

Event: Meeting of G20 heads of states and governmentdddddddddddddddddddddddddddddd
Date: 2 April 2009, Londoncvccccccccccccccccccccccccccccccccccccccccccccccccccccccc

Event: EU Finance Ministers and Central Bank Governors in Prague for informal ECOFIN meeting
Date: 3 - 4 April 2009, Prague

The meeting will be chaired by Czech Minister of Finance Miroslav Kalousek and also attended by Commissioners
Joaquín Almunia and Charlie McCreevy, President of the European Central Bank Jean-Claude Trichet and
President of the European Investment Bank Phillipe Maystadt. Minister Kalousek also invited a number of other
prominent guests, e.g. Jacques de Larosière, who is in charge of the High-Level Group on Financial Supervision
and the former Italian Minister of Finance and present President of the think-tank Notre Europe, Tommaso
Padoa-Schioppa.

Editor:cRolandcFreudensteinffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
Research Assistance: Katarína Králikovácccccccccccccccccccccccccccccccccccccc/cccccccccccccccccccccc
Design: José Luis Fontalbaccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Questions and comments: briefs@thinkingeurope.eu



ANNEX

G20: ECONOMIC SNAPSHOT
The leaders of the Group of 20, or G20, of the world's most powerful countries meet in London in April
- and top of their agenda will be the global economic crisis.

ARGENTINA
One of South America's largest economies, Argentina was in economic difficulties even before the
global downturn struck. Expansionary policies had caused the economy to overheat, fuelling inflation,
while tax revenues shrank because the country's farm exports were fetching lower prices on world
markets. The government responded to the fall in tax revenues by increasing taxation on agricultural
exports, a move that sparked continuing protests by farmers. President Cristina Fernandez, who came
to power in December 2007, nationalised the private pension system in November to help plug the
hole in the government's finances. Previously privatised companies such as Aerolineas Argentinas have
also returned to state control.

AUSTRALIA
Australia 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. Its
mining 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 argued
that the G20 alone has the global economic reach to tackle the world economic crisis. Mr Rudd
continues to enjoy strong approval ratings over his handling of the economy, and is renowned for his
strong work ethic, earning him the nickname Kevin 24/7.

BRAZIL
Latin America's biggest economy is also the world's biggest exporter of products ranging from beef
and chicken, to orange juice and coffee. But it has been hit by sharp falls in world commodity prices as
the global downturn curbs demand. Brazil's currency and stock markets have also suffered, after
foreign investors sold off assets in order to cover losses back home. The financial turmoil has already
seen one big banking merger, between local giants Itau and Unibanco, and further consolidation may
be in prospect. Brazil's government recently criticised the "Buy American" clause in the US's $787bn


(£563bn) economic stimulus package. Brazilian President Luiz Inacio Lula da Silva said the US and other
developed countries should not turn to protectionism. And he hopes the G20 summit will lead to a
greater role for developing countries in the world economy.

CANADA
Thanks to the North American Free Trade Agreement (Nafta), Canada's economic health is closely
linked 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 US
government's tactics, such as cutting interest rates and drawing up stimulus packages, although with
the same lack of success. However, Canada's banking sector and housing market are in better shape
than in the US, with far fewer sub-prime mortgages. In February, the Canadian parliament passed a
40bn Canadian dollar ($32bn; £23bn) economic stimulus package as part of the country's annual
budget. The successful vote was, however, hard to come by for the Conservative government, as
opposition parties said the original stimulus deal was insufficient, sparking a political crisis. The storm
resulted in Prime Minister Stephen Harper suspending parliament for six weeks so his government
could revise the plans.

CHINA
The global downturn failed to prevent China overtaking Germany as the world's third-largest
economy, but it has had serious consequences for the country, both internally and externally. Chinese
exports have been hit hard by falling world demand, with millions of rural migrants returning to their
villages after the factories that employed them closed down. China's waning appetite for raw
materials has had a knock-on effect on other countries' exports, crushing hopes that key emerging
markets could compensate for the developed world's slowdown. Its banks have not felt the impact like
elsewhere, but ordinary people have - with migrant workers especially hard hit. While China's growth
remains relative strong compared to other countries, it has launched a $587bn stimulus package and
has underlined that it now has the largest deficit in twenty years. And China has recently been talking
about the possibility of a new world currency to replace the dollar.

FRANCE
Unlike most other G20 countries, France has already seen social unrest in response to the global
downturn. In January, millions of French workers in both public and private sectors took industrial
action in protest at the government's handling of the economic crisis. The government has since
announced a 26bn-euro ($33.1bn; £23.5bn) initiative designed to revitalise the economy. While France
has not officially entered a recession, there are expectations that it will do so in 2009. Its trade deficit
hit a record 55.7bn euros ($71.4bn; £48.6bn) in 2008. President Nicolas Sarkozy has won domestic
plaudits for his plans to offer financial support for French industry, most notably the country's
carmakers. However, this has angered other European governments, who accuse him of
protectionism.


GERMANY
Germany's economy, which accounts for about a third of eurozone output, is set for a grim year. The
government has predicted that the economy will shrink by 2.25% in 2009, which would be its worst
performance in the post-World War II era. The news has come as a shock to many Germans, who
prided themselves on their fiscal rectitude, unlike the free-spending, highly-indebted British and
Americans. However, Germany's 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 50bn
euro ($63bn, £44bn) stimulus plan, and Chancellor Angela Merkel said Germany would emerge from
the economic crisis stronger than when it entered it. "We are operating on the principle that Germany
is 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 it
sees how the initial stimulus package has worked.

INDIA
India's economy has undoubtedly been affected by the global recession. The most recent official
figures showed that its economy grew by less than expected in the last three months of 2008. The
country's gross domestic product (GDP) grew by 5.3% between October and December, compared
with 7.6% in the previous three months, and 8.9% in the same period a year earlier. Agriculture, which
makes up about a fifth of the economy was one of the sectors to see growth fall, while industrial firms
such as Tata have been severely affected by the freeze in world credit markets and general fall in
global spending. The Congress-led government of Prime Minister Manmohan Singh now faces a
general election, starting on 16 April. It is hoping that pledged to waive farm loans and a rural
employment guarantee scheme will help it win a second term in power. India is worried that without a
global stimulus plan at the G20, its economic boom may be over.

INDONESIA
Globalisation has been a significant economic benefit for Indonesia in recent years. Thanks in no small
part to a big growth in manufacturing facilities for major multinationals, its economy grew 6.1% in
2008. However, with Western firms cutting back production towards the end of the year, Indonesia's
exports dropped sharply in the final three months of the year. To help lift the economy, the
government of President Susilo Bambang Yudhoyono has passed a $6bn (£4.3bn) fiscal stimulus. But
with overseas debts estimated at $151.7bn, the government has its own financial woes. Critics also say
it isn't doing enough to stamp out corruption that continues to deter some would-be investors.

ITALY
The Italian economy, the third-largest in the eurozone, was one of the first to enter recession. Its
economy has now shrunk for three quarters in succession: in the final three months of 2008, it
declined by 1.8%, following previous contractions of 0.5% and 0.4%. It was also one of the first to
approve a stimulus programme. In November, the government of Prime Minister Silvio Berlusconi


approved an 80bn euro ($102bn; £66bn) emergency package that included tax breaks for poorer
families, public works projects and mortgage relief. Italy has the world's third-highest debt burden,
expected to top 110% of GDP this year.

JAPAN
By the Japanese government's own admission, it is facing the worst economic crisis since the end of
World War II. The slowdown in the world's second-biggest economy is steeper than that being
experienced in the US or Europe, as Japan has been hit particularly hard by falling global demand for
its products, particularly electronic equipment and cars. Consumers have cut back too, alarmed by
rising unemployment. The economy contracted by 3.3% in the last three months of 2008, its worst
showing 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 is
being hampered by his growing unpopularity within his own party.

MEXICO
The Mexican economy is so intertwined with that of the US that when Wall Street sneezes, Mexican
firms can find themselves in intensive care. Under the North American Free Trade Agreement (Nafta),
the proportion of Mexico's exports heading for the US has grown to 85%, leaving the country
vulnerable to falling US demand. Mexico also thrives on remittances from workers who have migrated
to the US, but these have fallen for the first time since records began in 1995. In January, thousands
attended a rally in Mexico City to protest at the economic policies of President Felipe Calderon's
government.

RUSSIA
Russia's economy is reeling from the effect of a sharp fall in the price of oil. The 2009 budget is
expected to slip into deficit and analysts predict that the country is heading for its first recession since
1998. Russia's stock markets have plunged in recent months and the central bank has spent billions of
dollars 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 the
combined fortune of the 10 richest Russians by 66% to $75.9bn, according to business magazine
Finans. Overseas investment in the country is also being deterred by the perception that state-run
firms bully or intimidate foreign companies into handing over control of their investments. There is
also widespread cynicism as to how much President Dmitry Medvedev is really in control, and whether
power really lies with Prime Minister and former President Vladimir Putin.

SAUDIcARABIA
The Saudi kingdom is the only G20 country that also belongs to oil producers' cartel Opec (Indonesia
allowed its membership to lapse at the end of 2008). The global downturn has led to lower demand
for energy, further depressing world oil prices, despite Opec's attempts to cut output. As a result, the
International Monetary Fund predicts that Saudi Arabia and its neighbours will record fiscal deficits of


up to 3.1% of GDP in 2009, a marked decline from surpluses of 22.8% of GDP in 2008. King Abdullah
recently replaced the country's central bank chief in a rare reshuffle.

SOUTHcAFRICA
South Africa has the continent's biggest economy and is the only African member of the G20. The
country has already been hit by the global recession, its economy contracting for the first time in 10
years in the last three months of 2008. Between October and December it shrank 1.8% from the
previous quarter. Like Brazil, it fears that the global downturn will lead to a rise in protectionism in rich
nations, making it even harder for developing countries to gain a foothold in key markets and
increasing their sense of economic isolation. South Africa's finance minister Trevor Manuel told the
World Economic Forum in Davos in January that Africa was "at risk of decoupling, derailment and
abandonment together". The African National Congress government of President Kgalema Motlanthe
continues to face tough challenges in alleviating poverty and reducing crime levels. The country goes
to the polls on 22 April.

SOUTHdKOREA
The government in Seoul, like its neighbours in the region, fears that the global slowdown could lead
to a repeat of the 1997-98 Asian economic crisis. South Korea's economy shrank by 3.4% in the last
quarter of 2008 compared with the year before, while President Lee Myung-bak has warned that his
country faces an "economic emergency". In response, the government has announced a stimulus
package worth 14 trillion won ($10.9bn; £6.6bn) to boost the economy, with eleven trillion won aimed
at public projects and three trillion won for tax cuts to encourage spending. Meanwhile, interest rates
have fallen to record lows.

TURKEY
As it tries to revive its EU membership bid, Turkey has been talking up its response to the downturn as
evidence that its reactions are those of a developed country, not an emerging market. In the past
three months, the central bank has cut interest rates by 3.75 percentage points, although the rate
remains 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 were
suspended in January after disagreements over the terms. As well as trying to reduce unemployment
levels from the current 12%, the government of Tayyip Erdogan has had to face constant suspicion of
its Islamist routes, in a country where the secular and religious are often divided.

UNITEDcKINGDOM
The International Monetary Fund expects the UK to suffer the worst contraction among advanced
nations in 2009, with its economy predicted to shrink by 2.8%. The Bank of England has already cut
interest rates to just 0.5% in a bid to help the British economy out of recession, while unemployment
is now over 2 million - the highest level since 1997. It has also begun a programme of quantitative
easing to pump more funds into the economy by purchasing government bonds. Troubles in the


banking sector have led the government to bail out some of the country's biggest financial institutions,
including Royal Bank of Scotland, in which it now holds a 68% stake. Recently, the governor of the
Bank of England warned that the UK economy could not afford another stimulus package, with the
government deficit set to soar to 11% of GDP.

UNITEDcSTATES
The global economic turmoil began in the US, thanks to the sub-prime mortgage crisis in which
underperforming home loans were repackaged and sold on as toxic debt. The Federal Reserve has cut
interest rates to near zero in a bid to unfreeze the credit markets, while new Treasury Secretary
Timothy Geithner has announced a partnership with the private sector to purchase toxic assets, in
order to get them off the banks' balance sheets. President Barack Obama has signed into law a
slimmed-down economic stimulus plan worth $787bn (£563bn), but problems in the wider economy
are worsening, with unemployment at its highest since 1992. The government has also announced
new plans for tougher financial regulation, including international oversight. But President Obama has
made it clear that he expects other countries to join the US in doing the heavy lifting of pulling the
world economy out of recession.

EUROPEANcUNION
Sixteen of the 27 European Union countries share the euro as their common currency. Their individual
economic performances vary considerably, but the eurozone as a whole has been in recession since
September 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. The
eurozone's key interest rate is now at 2%, its lowest level since December 2005. The worst performing
EU economy is Latvia, which does not belong to the eurozone. Latvian GDP could fall by as much as
10% this year.

<<Source: BBC: Special Report >>


Financial Crisis Watch 1 April 2009

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