Friday December 12, 05:44 PM
World stocks tumble as US scrambles to save auto industry
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LONDON (AFP) - Stock markets took a beating Friday despite European and Japanese stimulus plans to counter a "once in 100 years" recession as the US government scrambled to save the near-bankrupt US auto industry.
With Russia officially entering recession, Bank of America (NYSE: IKJ - news) and other international companies making more mass layoffs and European production falling faster than expected, the grim data built up around the world.
The European Union agreed a 200-billion-euro (260 billion dollar) stimulus plan in which members would pump on average the equivalent of 1.5 percent of gross domestic product into their economies to dig the bloc out of recession.
"Everybody absolutely agrees on the gravity of the crisis," French President Nicolas Sarkozy said after chairing an EU summit in Brussels. "Everybody agrees on the need for a stimulus plan."
To battle what he called a once-in-a-century recession, Japanese Prime Minister Taro Aso announced a new 23-trillion-yen (255 billion dollars) injection that will take government revival efforts to more than 550 billion dollars since October.
"This is a great global recession which comes once in 100 years. Japan alone cannot stay out of this tsunami," Aso said. "But by taking appropriate measures without any delay, we can minimise the impact."
In Washington, the administration of President George W. Bush said it was ready to prevent the collapse of the US auto industry after the Senate rejected a 14-billion-dollar fund for General Motors (NYSE: GM - news) , Ford Motor and Chrysler.
"Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry," Treasury Department spokeswoman Brookly McLaughlin said.
The White House said it may tap into the government's 700-billion-dollar bailout fund for the finance industry to help the automakers.
"Given the current weakened state of the US economy, we will consider other options if necessary -- including use of the TARP program -- to prevent a collapse of troubled automakers," said spokeswoman Dana Perino, referring to the Troubled Asset Relief Program conceived to help financial services firms.
Perino declined to say when a decision on tapping the TARP would be made, but said the White House understood "the urgency of the situation."
The auto rescue deal passed the House of Representatives this week but collapsed in the Senate late Thursday amid stiff opposition from Republican senators, who demanded that wages paid by the US firms be brought into line with those at foreign firms with non-union plants.
The measure would have required the manufacturing giants to engage in restructuring to ensure their long-term survival and repayment of the government loans or face bankruptcy proceedings.
US president-elect Barack Obama urged the White House and lawmakers to "find a way" to give US automakers the short-term aid they need to avert collapse, while requiring a long-term industry overhaul.
World (WRGR.TA - news) stock markets tumbled on news of the auto rescue plan's collapse.
On Wall Street, the Dow Jones Industrial Average was down 1.57 percent in morning trading.
Tokyo's Nikkei index (news) ended down 5.6 percent -- with Toyota Motor Corp (Frankfurt: 853510 - news) . off 10 percent -- and Hong Kong 5.5 percent.
In late European trade, London dived 2.73 percent, Frankfurt tumbled 2.49 percent and Paris plunged 3.3 percent.
The dollar tumbled below the key 90 yen level for the first time since 1995 and also fell against the euro because of the auto talks collapse. Oil fell back to about 47 dollars a barrel. The British pound also hit a record low of 1.12 euros as concerns grow over the outlook for Britain's economy.
Layoffs at Bank of America were the latest to reinforce the fears of government leaders everywhere. US banking giant Citigroup (NYSE: C - news) last month said it was cutting a near-record 50,000 jobs worldwide.
Telecoms equipment giant Alcatel Lucent (NYSE: ALU - news) said it would cut 1,000 managerial jobs and Japan's Sharp Corp. said it was cutting 380 domestic jobs, days after Sony Corp (Munich: 853687 - news) . said it was slashing more than 8,000 regular jobs and the same number of temporary or contract posts.
Europe's second biggest bank, Spanish giant Santander (Madrid: SAN.MC - news) , said it would slash 1,900 jobs at its three British subsidiaries next year.
The Russian government confirmed that the country has officially entered a recession and Moody's Investors Service cut the outlook on Russia's key ratings to "stable" from "positive" because of liquidity pressures from the global financial crisis.
In Geneva, WTO chief Pascal Lamy scrapped plans for a ministerial meeting aimed at clinching a global free trade deal this year, dealing a blow for supporters who had claimed an agreement would boost the world economy.
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