Leaders meet as economic woes pile up
A slew of data and bleak company reports have underscored the growing sense of urgency facing the global economy.
Washington -- The world's 20 leading economies held a historic summit in Washington over the weekend to hammer out plans for launching a new global financial order amid signs of a sharp economic deterioration and renewed share market turmoil.
Launching moves aimed at overhauling the international financial system and endorsing measures to spur world economic growth formed the two strands of the Saturday summit of so-called Group of 20 (G20) leaders, which was hosted by US President W. Bush.
But while the meeting was expected to set in motion a potentially lengthy process of economic diplomacy for reshaping financial market supervision, a slew of data and bleak company reports have underscored the growing sense of urgency facing the global economy.
"The crisis is far from over and just when we think we understand it, another surprise pops up," said Mark Cliffe, head of global markets at ING Bank.
Underscoring the mounting pressure on government leaders, key industries led by the car industry are queuing up seeking government aid to help them limp through what is the worst financial crisis since the Great Depression.
Figures released Friday showed US retail sales recording their biggest fall on record in October, cascading down 2.8 percent and fuelling fears that the world's biggest economy could be on the brink of a deep and protracted economic downturn.
The result was to trigger another wave of selling on Wall Street with the New York Stock Exchange marking the end of another volatile trading week by plunging by about 4 percent.
This also helped to set the stage for another turbulent trading week starting on Monday and acts as a reminder of the deep sense of uncertainty gripping global markets.
The International Monetary Fund has forecast that most advanced economies will slip into recession in 2009. Emerging countries like China and India will carry the mantle of growth for the year.
Highlighting the plight of the US car industry, auto sales plummeted by 15 percent month on month in October, with the top US carmaker General Motors Corp warning that it was fast running out of money after posting a 2.5-billion third quarter-loss.
US carmakers are in talks about a possible 25-billion-dollar government bailout. The deal is being pushed by Democrats in Congress but many Republicans and analysts are skeptical of rescuing the industry for what is perceived as its own failure to modernize.
German Chancellor Angela Merkel returned to Berlin this weekend to hold a crisis meeting on Monday with the board of GM's German offshoot Opel, which is also putting up its hand for state support to help it face up to the crisis and to sharp contraction in auto sales.
Meanwhile, the US Treasury is weighing new measures to try to stem surging house foreclosures, which helped to trigger the financial firestorm that swept through global markets in recent months. Struggling homeowners have been promised help in refinancing.
Analysts have also warned that the next round of US quarterly bank results are likely to be very grim reading, as financial institutions continue to report write-downs related to the near-collapse of the US mortgage market.
The G20 leaders' officials have agreed to a communiqué setting out a series of principles for reshaping the world financial architecture and calling for finance ministers to meet to hammer out the details.
This would be before another summit to review the progress of the proposals for overhauling the financial system at the end of March or early April.
In the meantime, global economic indicators are tanking.
The release of the new US data came just 24 hours after figures released in Brussels showed the 15-member eurozone had slumped into recession with analysts predicting a further contraction in the currency bloc's economy in the run-up to the end of the year.
This followed a dramatic 1.6-percent slide in industrial production in the eurozone in September.
While the giant European electronics group Siemens AG reported a net quarterly loss of 2.4 billion euros (3 billion dollars), Finland-based Nokia Corp, the world's biggest mobile phone maker revised down its business outlook.
At the same time, another batch of figures out of China pointed to how the shock waves from the crisis that first took hold in advanced economies is now rapidly spreading to the world's emerging economies.
The data from China showed the Asian powerhouse economy losing momentum with urban fixed investment sinking and falling exports and construction driving down economic growth. China unveiled a 588-billion-dollar stimulus package just days before the Washington summit.
Poor nations have also struggled to get a hold of foreign investment as all countries have been forced to keep their cash reserves closely guarded.
Kumi Naidoo of the Global Call to Action Against Poverty warned that developing countries expected "the same urgency now that leaders demonstrated when it came to rescuing the banks just weeks ago."
Andrew McCathie and Chris Cermak/DPA/Expatica