World financial crisis

European output plummets, as US awaits final stimulus package vote

Article published on the 2009-02-12 Latest update 2009-02-12 16:14 TU

House Nancy Pelosi and House Majority Leader Rep. Steny Hoyer
(Photo: Reuters)

An agreement between Democrats and Republicans in the US means that lawmakers will take a final vote on the 619 billion euro stimulus package on Thursday and Friday. Meanwhile, Europe has announced a massive drop in industrial output for the last quarter of 2008.

The US stimulus package is "an enormous amount, five per cent of GNP [Gross National Product] never seen before, at least since World War Two,” says Christian Stoffaes, an economist from a Paris think-tank.

If the deal goes through it will be a major success for President Barack Obama.

“I want to thank the Democrats and Republicans in Congress who came together around a hard-fought compromise that will save or create more than 3.5 million jobs and get our economy back on track,”  Obama said Wednesday.

The agreement emerged after two separate versions of the stimulus package were agreed in the House of Representatives and the Senate.

But it is not clear whether the final vote will get more Republican support after they failed to back the House deal. Just three Republicans broke party ranks to help the stimulus through the Senate.

The deal itself will include billions in infrastructure development, tax relief and funds to help 49 states that are likely to break legal requirements to produce balanced budgets.

“The rescue of the banking sector […] it’s not exactly spending, it’s basically a guarantee, but we can expect that a part of that money will be lost forever,” Stoffaes told RFI.

Meanwhile in Europe, the economic news was bleak, as industry reported the fastest cut in production on record:

* Eurozone industrial output fell by 2.6 per cent in December and by 12 per cent in the whole of 2008;

* Spain officially entered recession in the fourth quarter of 2008;

* In France car manufacturer Renault reported a 78 per cent drop in profits for 2008, while EDF also saw a massive drop in profits to 3.4 billion euros.

The French plan to bailout its car industry is also set to be tested at the European Commission this week.

Christophe de Margerie, Chief Executive of French oil company Total
(Photo: Reuters)

The Commission have not yet approved a loan to PSA Peugeot Citroen and Renault which some believe is a form of protectionism.

“The measures that we are taking are measures which fit perfectly within the framework of the treaties,” says French Prime Minister François Fillon.

Despite all the bad news, Total, the French oil group announced record profits for 2008.  High oil prices helped them to make more than 13 billion euros profit.