World financial crisis

Japan enters recession, IMF calls for more funds

Article published on the 2008-11-17 Latest update 2008-11-18 17:55 TU

Managing Director of the International Monetary Fund (IMF) Dominique Strauss-Kahn
(Photo: Reuters)

The head of the IMF, Dominique Strauss-Kahn said on Monday that the international body needs almost 80 billion euros over the next six months. He also called for countries to cut interest rates and use government finances.

The head of the European Commission, Jose Manuel Barroso, said on Monday that Europe needs a "fiscal stimulus plan".

On Monday Japan officially entered recession as its economy, the world's second-largest, shrank by 0.1 per cent in the third quarter of 2008. This is the first time in seven years that Japan has entered recession.

"The yen is very strong at the moment, and that makes Japanese exports uncompetitive," correspondent Julian Ryall told RFI from Tokyo. "Japan has for many year relied heavily on its exports."

The car industry

French carmaker Renault will reduce its worldwide production by 25 per cent in the last quarter of 2008, the group's CEO said on Monday.

Germany's Finance Minister, Peer Steinbrueck said that an economic rescue package for the automobile industry as a whole made "no sense".

He was speaking after the automobile company Opel, which employs 25,000 in Germany, requested loan guarantees from the German government. Its parent company, General Motors, has said it is close to bankruptcy.

The head of General Motors said that the collapse of the American car industry would have a devestating effect on the country's economy. US car sales have reached their lowest rate in 25 years.

GM will sell its three per cent stake in the Japanese company Suzuki in an effort to raise funds. Suzuki has said it will spend 231 million dollars to buy back the same number of shares when GM sells them on Tuesday. The US carmaker once held 17 per cent of Suzuki.

The White House said on Monday that it did not want American carmakers to go out of business but that companies would have to make do with the funds already allocated.

Meanwhile in Europe, 47 manufacturing companies on Monday called for greater economic support from government after last weekend's G20 meeting.

Elsewhere

China: The country's unofficial banks may be legalised under new legislation drafted by the Central Bank. Private lending from companies or individuals would be authorised under the new system as long as the lending rate is within four times the state-set benchmark.

Russia: The Vice Finance Minister, Dmitri Pankine said on Monday that Russia can not lend four billion dollars to Iceland. He said a lesser figure would be established once the IMF had taken a decision.

Switzerland: The bank UBS said on Monday that no bonuses would be paid to the chairman and the board of directors for this year. This comes after the Swiss government stepped in to cover the bank's billions of dollars of losses related to the US sub-prime crisis.

UK: The Confederation of British Industry said on Monday that the recession it predicted months ago would be worse and would last longer than it originally thought. The group expects the economy to shrink by 1.7 per cent in 2009.

South Korea: The central bank said on Monday that it would buy government bonds from finance institutes so as to stabilise the market. The bank will buy 710 million dollars worth of bonds later this week.

Germany: The property lender Hypo Real Estate said on Monday it expected its 2008 results to be down. It confirmed that it had lost three billion euros in the third quarter.

The KfW bank has announced a loss of almost two billion euros over the first nine months of this year. Earlier this year it was obliged to bail out the bank IKB, in which it owns a majority share, after IKB paid 319 million euros to Hehman Brothers on the day of its bankruptcy.

US: Goldman Sachs has said its CEO and six of its managers will not receive any bonuses this year. The seven employees will be paid 600,000 dollars without bonuses whereas last year the CEO had been paid over 68 million dollars.

The JP Morgan  bank says it will cut thousands of jobs in its investment bank division because of the financial crisis. Many of the layoffs are expected to hit London's financial sector, the City.

Citigroup, one of the country's largest commercial banks, announced that it would be laying off 50,000 people worldwide, which would reduce its global workforce by 20 per cent since 2007.