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World financial crisis

World markets follow US plunge, EU considers huge spending boost

Article published on the 2008-12-02 Latest update 2008-12-02 11:50 TU

Stores are slashing prices as retail sales drop in October(Photo: Reuters/file photo)

Stores are slashing prices as retail sales drop in October
(Photo: Reuters/file photo)

Markets around the world dropped Tuesday, a day after the Dow Jones Industrial Average dropped 7.70 per cent, the fourth-largest point loss in history. As data shows a deepening recession in Europe, finance ministers from the 27 EU member states are meeting in Brussels to debate stimulus spending proposals.

While Tokyo and Hong Kong markets fell 6.35 per cent and five per cent, European shares made a comeback after falling by about 1.5 per cent in early trading. They dropped five to eight per cent on Monday.

Data released Monday showed that manufacturing activity in the 15-member eurozone hit a record low. German retail sales dropped 1.6 per cent in October from the month before. Unemployment in Spain rose by six per cent in November to almost three million. It stood at 11.3 per cent in the third quarter, the highest rate in the EU.

But as Europe suffers ever greater economic turmoil, EU member states cannot agree on how to put in place the 200-billion-euro stimulus package announced last week. A meeting of eurozone members Monday ended inconclusively.

Germany is more cautious than France, criticising what it calls “populist” spending measures. France has pressed for large spending programmes across the continent.

The Netherlands has objected to stronger economies being pushed to do more than those countries with bigger budget deficits.

The European Central Bank and Bank of England are expected to cut their key rates Thursday because of a sharp drop in inflation.

The president of the US Federal Reserve, Ben Bernanke, said that interest rate reductions are possible, but “at this point the scope… is obviously limited”.