Global Recession Economic News

DUBLIN (Reuters) - The Irish government will invest 5.5 billion euros ($7.68 billion) in the country's three main lenders, taking majority control of Anglo Irish Bank (ANGL.I) after a loan scandal there rocked an already beleaguered industry.

Japan’s government expenditure will increase to a record next year as Prime Minister Taro Aso tries to spend his way out of a recession and lift his slumping popularity ahead of an election.

Spending will rise 6.6 percent to 88.5 trillion yen ($988 billion) in the year starting April 1, a third year of expansion, according to a budget proposal released by the Finance Ministry in Tokyo today. The government will sell 33.3 trillion yen of new debt, the most in four years, to help fund a revenue shortfall.

China may need a second stimulus package focused on boosting consumption and helping the poor as the economy slumps before $4 trillion yuan ($585 billion) of infrastructure spending kicks in.

“China's economy is going through a shock period,” said Lu Ting, an economist at Merrill Lynch & Co. “The government must aid the unemployed and households in general to help people survive.”

The International Monetary Fund said on Monday Chinese growth could almost halve next year as a global downturn sucks in the biggest emerging economy.Japan reported its sharpest crash in business sentiment in three decades and China said its industrial output grew at the slowest pace since 1999, adding to evidence that a global downturn would last through next year.

The European Central Bank, Britain and Sweden all made big cuts in interest rates on Thursday to shore up economies across Europe in the face of ever-bleaker financial news.

The cuts were applauded by many analysts but market reaction indicated that even more sweeping moves may be needed to halt the decline.

Sweden lopped off a record 175 basis points to 2.0 percent and the ECB slashed 75 points to 2.50 percent, the eurozone's biggest ever cut.

Fear of a prolonged global recession also sparked a new round of deep interest rate cuts, with Thailand leading the way on Wednesday and central banks in Europe, Britain, Sweden and New Zealand expected to follow in the days ahead.

On Monday, the National Bureau of Economic Research, a private research group considered the official arbiter of recessions, said the U.S. economy entered recession in December 2007. Economists said it will likely stay there through the middle of 2009.

China warned on Thursday that its economic downturn could threaten stability as pressure grew on the European Central Bank to make a big cut in interest rates to help contain the global financial crisis.

In India, emerging Asia's other economic titan, financial markets were closed after Islamist militants killed more than 100 people in the commercial capital, Mumbai.

Violence in India and political unrest in Thailand highlighted political risk as another potential threat to emerging markets battered by the global crisis.

China slashed its key lending rate by the most in 11 years, extending efforts to prevent an economic slump less than three weeks after unveiling a 4 trillion yuan ($586 billion) stimulus plan.

The key one-year lending rate will drop 108 basis points to 5.58 percent, the People's Bank of China said on its Web site today. The deposit rate will fall by the same amount to 2.52 percent. The changes are effective tomorrow.

Oil prices fell toward $53, touching a fresh 22-month low on Wednesday, due to increasing signs of global weakening demand as economic gloom deepened.

U.S. light crude fell as low as $53.30 a barrel, the cheapest price since January 2007. It was trading 69 cents lower at $53.70 by 0926 GMT.

London's Brent crude fell $1.23 to as low as $50.61.

Oil has slid by about one-third from its record highs above $147, struck in July.

China will impose a long-awaited fuel tax "very soon," the head of National Development and Reform Commission's (NDRC) Energy Research Institute said in comments reported on Tuesday by the China Daily.

"The announcement will come very soon, and actually specific plans have already been suggested to the government long ago," Han Wenke, director general of the research body, was quoted as saying.

The U.K.'s inflation rate had the biggest drop in at least 11 years in October as oil and food costs fell and the economy slipped toward a recession.

Consumer prices rose 4.5 percent from a year earlier, compared with 5.2 percent the previous month, the Office for National Statistics said today in London. The median forecast in a survey of 27 economists was 4.8 percent. The rate has now exceeded the Bank of England's 2 percent target for a 13th month.

Asian stocks fell by up to 5 percent on Tuesday as prospects of a deep global recession and one of the biggest job cut plans in history at Citigroup doused expectations for a financial sector recovery in 2009.

Major European stock market futures shed as much as 0.6 percent in early trade, following losses in Asia and U.S. markets. S&P 500 futures were down 0.8 percent.

Japan became the latest major economy to fall into recession on Monday with France close behind, and the IMF said it needed at least $100 billion to fight an economic crisis enveloping the world.

Meanwhile, the battered auto industry came into focus. The U.S. Senate was to begin debating a bailout later in the day, Germany said it was ready to help General Motors unit Opel, and Japan's Toyota came under ratings scrutiny.