26 - Dec 02, 2001
Germany's economy shrinks
Germany's economy has shrunk slightly in the July to
September quarter, sparking fears of an all-out recession.
The country's economic output, or GDP, contracted by 0.1% in
the quarter, the Federal Statistics Office said.
The figure, which was worse than analysts had predicted,
followed a stagnant performance in the previous quarter, leaving Germany within
a hair's breadth of a technical recession — defined as two successive quarters
of negative growth.
On an annual basis, GDP rose 0.3% in the July to September
period, the weakest performance since early 1997.
The release of the data followed a report revealing a drop in
German business sentiment, and warnings from Finance Minister Hans Eichel that
economic activity would remain subdued until next spring.
Germany's finance ministry said the data indicated that
economic risks had increased.
"However, economic weakness should be overcome
soon," the ministry said in a statement.
"In 2002 economic forces of buoyancy should win the
The ministry pinned the blame for the contraction on
increased energy prices and food costs.
Opinion is still mixed on whether Germany will topple into a
Some analysts forecast a mild rebound later in the year,
driven largely by consumer spending.
"I think private consumption will be stronger in [the
fourth quarter] because consumers will move forward purchasing ahead of the euro
changeover," said Ulla Kochwasser from IBJ Deutschland.
Germany's stagnation has worrying implications for the whole
The German economy accounts for more than one-third of total
eurozone output, and the latest figures indicate that it is performing much
worse than the wider European average.
UK economic growth trimmed
The UK economy grew by less than originally thought over the
July to September quarter, statisticians have admitted.
The official estimate for growth in UK economic output, or
GDP, for the period has been trimmed from 0.6% to 0.5%.
On an annual basis, the growth rate was revised down by 0.1%
to 2.1%, further distancing it from a Treasury target range of 2.25-2.75%.
But the figures suggest that the UK is still growing more
quickly than most other industrialised nations.
Official data released on Thursday showed that Germany's
economy, the world's third largest, shrank by 0.1% during the July to September
According to a report earlier this week from the Organisation
for Economic Cooperation and Development, the world's two biggest economies are
also in the doldrums.
The US, the world's biggest economy, is set to expand by just
0.7% next year, while world number two Japan is forecast to shrink by 1%, the
Analysts had feared that UK growth for the July to September
period, which includes the aftermath of the terrorist attacks in the US, would
be revised far lower.
Investors gave a cautious welcome to the July to September
growth figures, pushing the FTSE 100 index of leading shares slightly higher
late on Thursday morning.
However, the latest statistics also show that the UK still
faces a serious imbalance between the manufacturing and service sectors.
Manufacturing output between July and September fell by 0.8%
compared with the previous three months, while the service sector grew by 0.6%.
Export-dependent manufacturers have been hit hard by slowing
growth in the US, while the European single currency's persistent weakness
against the pound has priced them out of markets in the eurozone.
Japan trade slump sparks global fears
Japan's trade surplus fell by 32% in October compared to the
previous year, with a decrease in both exports and imports.
The continuing trend reflects a drop-off in exports in line
with the global downturn.
With the country heading into a prolonged recession, the
government is promising additional measures to try to stimulate demand.
Japan's once-massive trade surplus continues to shrink at a
Sales of high-tech products have been hit hard since the end
of last year because of the sharp slowdown in the United States, the key market
for Japanese goods.
For all that, Japan still ran a substantial surplus for the
month of $3.8bn, and the trade balance with the United States remained heavily
in Japan's favour at $5bn.
Korean economy beats forecasts
The South Korean economy has continued to avoid recession,
with new figures showing a better-than-expected rise in gross domestic product
(GDP) in the third quarter.
Korean GDP grew by 1.2% in the three months to October,
beating expectations and the weak 0.4% figure achieved in the previous quarter.
But at just 1.8%, the annualised rate is way behind the 9/2%
growth enjoyed this time last year.
The news is, however, an indication that Korea may prove more
resilient than some of its neighbours as the global economic slowdown starts to
Eastern Europe bucks the global trend
The European Bank of Reconstruction and Development (EBRD)
has forecast a third year of strong growth for economies in Central and Eastern
In its latest report on the economic progress of the region,
the EBRD has predicted that the region will expand by 4.3% this year, following
5.5% growth in 2000.
"Our region is less directly exposed to that part of the
industrialised world that will slow down most, that is the US economy," the
EBRD's chief economist Professor Willem Buiter told the BBC.
Reforms to allow countries in the region to meet condition
for EU accession were also cited as reasons for the resilience of the economies.
But the report warned that the economies were not immune to
the effects of the global economic slowdown.
Blair delivers fresh euro hint
The UK has missed the boat in Europe too many times, Tony
Blair is due to say in what is being seen as his strongest hint yet towards
joining the euro.
Mr Blair will speak of the British "tragedy" of
missed opportunities, with the biggest mistake being the failure to join from
the outset what is now the European Union.
In a speech to the European Research Institute in Birmingham,
Mr Blair will again repeat his policy the key economic tests must be met before
a referendum on euro entry.
Meanwhile Downing Street has denied reports that Mr Blair has
postponed a referendum on joining the single currency until 2005, to coincide
with a general election.
The Sun newspaper claims the prime minister "privately
signalled" the decision ahead of his speech on Friday.
France proposes fast EU expansion
France has startled its fellow European Union member states
by suggesting that not 10 but 12 new countries should be included in the next
wave of expansion.
While foreign ministers welcomed this week the annual
progress reports, and said that the pace of enlargement negotiations should be
maintained, France sought to add Bulgaria and Romania to the list for admission
Even a senior French diplomat said he was caught unaware by
the remarks made on Monday by the French Foreign Minister, Hubert Vedrine.
UK and Spain to sign extradition treaty
The Costa del Sol has attracted British fugitives Britain and
Spain are expected to sign a treaty to end the lengthy extradition process that
helped make Spain's Mediterranean coast a hideaway for British criminals.
UK Home Secretary David Blunkett is on a two-day visit to
Spain to finalise a new fast-track system for extraditions between the two
He will discuss drug trafficking, co-operation on terrorism
and asylum issues with his Spanish counterparts.
Lastminute.com: British online holiday and leisure
retailer Lastminute.com has reported widening losses. The full year pre-tax loss
widened to £53.75m from £35.79m a year earlier.
Sainsbury: The supermarket giant reported profits of
£309m ($432m; 475m euros) for the April to October period, up 3.2% on the
previous six months.
Nintendo profits: The group's net profits rose 14.4% to
34.35bn Japanese yen (£197m; $280m) during the first six months of the fiscal
year, from 30bn yen a year earlier. Sales rose 18.4% to 225.72bn yen.
EU warns on 'wealth gap'
Unless Europe quickly learns to innovate and adopt new
technologies, its standard of living will fall ever further behind the US, the
European Commission has warned.
Erkki Liikanen, European Commissioner for Enterprise, said
that average wealth per head in the EU was just two-thirds of that in the US.
This gap is the widest since the 1960s.
Japanese insurers reel
Japan's financial sector was already in some trouble. The
aftermath of the World Trade Center attacks have started to reverberate around
Japan's already troubled insurance industry.
Medium-sized non-life insurance firm Taisei filed for
bankruptcy protection, after saying that claims from the US attacks raised its
liabilities to 40bn yen (£229m; $325m) more than its assets.
At the same time, Nissan Fire and Marine Insurance said it
expected to pay reinsurance of 74.4bn yen as a result of the attacks.
The two firms were due to merge, and insisted that Taisei's
bankruptcy had not derailed their plans.
US company signs food deal with Cuba
An American agribusiness company, Cargill, says it has signed
an agreement to sell food to Cuba in the wake of the island's worst hurricane in
more than 50 years.
The deal — which is still subject to US Government approval
— would be unprecedented in four decades of hostile relations between Cuba and
the US, who have no formal diplomatic ties.
At least two other American companies are believed to be
negotiating similar deals with the authorities in Havana.
US consumers regain confidence
US consumers are regaining the confidence that was lost after
the 11 September terrorist attacks, according to the latest data.
The revival has renewed hopes that the US will quickly be
able to pull itself out of its current economic slump.
The University of Michigan's closely-watched consumer
sentiment survey rose in November for a second month in a row. The index hit
83.9, up from 82.7 last month.
Little argument over UK rate cut
Only one member voted against the half-point cut Bank of
England interest rate chiefs voted eight to one in favour of the cut implemented
earlier this month, minutes have revealed.
The half-a-point cut, which brought rates down to 4.0%, was
the seventh this year.
The one dissenter on the bank's rate setting panel, the
Monetary Policy Committee (MPC), wanted to see a cut of only one quarter of a
And one committee member suggested the Bank should consider
more drastic action, and chop rates by three quarters of a point.
Vietnam freezes rice exports
The world's number two rice exporter, Vietnam, has blocked
shipments until February because of a shortage of reserves for its own
The ministry ordered traders in its main rice-growing region
to stop offering new rice export contracts, after seeing domestic reserves
Rice prices have risen about 20% in recent months to 2.9m
Vietnamese dong (£136; $193) per tonne from 2.4m dong in May and June.
Loss admissions boost Japanese banks
Shares in two of Japan's leading banks, Asahi and Sumitomo
Mitsui, rose sharply despite admissions that they will slide into the red this
Traders read the banks' downbeat statements as signs that the
country's banking sector is moving closer to sort out its bad debt problem.
The 14 biggest banks in Japan are believed to have
non-performing loans worth up to 6 trillion Japanese yen (£34.5bn; $48.9bn).
Indonesia reaches IMF agreement
In a step to winning back the confidence of international
investors, Indonesia has reached agreement with the International Monetary Fund
(IMF) on a package of economic reforms.
The agreement, which must now be submitted to the IMF board
early next year, is believed to encompass banking, privatisation and legal
The deal promises progress under an existing $5bn loan
programme for the country, and could pave the way for new loans next year.
Indonesia's economy has been mired in crisis for years, and
the government of President Megawati Sukarnoputri has struggled to gain
credibility among investors, who have shunned the country since the economic
crisis of 1997-98.
Bangladesh asks for $1bn loan
Bangladesh is seeking up to $1bn in credit from the World
Bank to offset the negative side effects on its economy of the 11 September
The country's exports have fallen by 35% in the past two
months, because the US is the main consumer of Bangladeshi garments, buying more
than $2bn-worth every year.
Bangladesh's finance ministry said, however, that the World
Bank wanted it to cut subsidies on utilities like gas, electricity, petrol and
fertiliser in order to be able to receive such assistance.