World recession fears mount over crisisThu Oct 16 2008
Aug 18, 2009
Growing fears that the financial crisis will morph into a worldwide recession prompted a new bloodbath on stock
markets Wednesday as EU leaders pushed for swift moves to overhaul global finance.
"The world economy is still headed into a recession despite the global financial market rescue effort," said Carl
Weinberg, chief economist at High Frequency Economics.
"The decline will be deep and protracted. It has already started. Nowhere is the economic house in greater disorder than
Euroland, although some may argue that Japan is a bigger mess."
With most analysts saying that a US recession appears virtually certain due to the impact of the credit crunch and
housing meltdown, the leaders of the 27-nation European Union are struggling to shore up their economies.
French President Nicolas Sarkozy announced at a summit in Brussels that EU leaders had agreed a common action plan
and on the need for a global summit to address the crisis, possibly in November.
"The whole of Europe, without exception, approves the measures adopted on Sunday in Paris" by the 15 nations that
make up the single currency eurozone and Britain, he told a press conference.
Leaders from euro countries backed a wide-ranging bank rescue plan on Sunday that included measures to inject new
capital into ailing lenders and encourage the flow of credit to consumers and businesses.
"The system must be completely overhauled, an overhaul that must be global," Sarkozy, who will meet this week in the
US with President George W. Bush, had earlier told his peers.
"A new capitalism is needed, based on values which put finance at the service of business and citizens, and not vice
Amid further bleak US data that showed retail sales slumped 1.2 per cent in September, the sharpest drop since August
2005, New York's Dow Jones Industrial Average suffered its worst percentage drop since 1987.
The index slid 733.08 points (7.87 per cent) to close at 8,577.91 in the worst one-day point loss since last month's
record 777-point decline.
London's FTSE 100 index of leading shares shed 7.16 per cent, while in Paris the CAC 40 fell 6.82 per cent and the
Frankfurt DAX gave up 6.49 per cent.
In Asia, Tokyo added 1.06 per cent, building on Tuesday's record 14 per cent gain but Hong Kong closed down 5.0 per
Late Tuesday, San Francisco Federal Reserve president Janet Yellen became the first US central bank official to
acknowledge a recession is probably underway.
She said she expected essentially no growth at all in the third quarter and "an outright contraction" in the fourth quarter.
"Indeed, the US economy appears to be in a recession," she said.
After the US agreed a $US700-billion dollar bailout plan of which 250 billion will be injected into banks, Bush said