Britannia Radio

The economic clouds darken daily and no area is immune, it seems. The
eurozone is wakening from a self-satisfied complacency to realise it
is not immune.
This is a round-up of the situation today.
xxxxxxxxxx cs
====================
EU OBSERVER 19.8.08
France prepares crisis talks on eurozone
LISBETH KIRK
Current EU presidency France is preparing crisis talks on how to keep
the eurozone economy from falling into recession and is expected to
table plans when EU ministers meet in Nice on 12 September.

The initiative was announced by prime minister Francois Fillon on
Monday (18 August) in Paris after an emergency session of five French
ministers with economic portfolios.

"We have a common economic area, a common currency," Mr Fillon said,
adding that co-ordination within the euro zone is "indispensable".

At a news-conference following the French cabinet meeting on Monday,
Mr Fillon added that recent Spanish plans to inject €20 billion of
public funds to counter the country's economic slowdown "would make
no sense" and "wouldn't be effective" in France, reports the Wall
Street Journal.

The announcement follows bleak estimates for the French economy, the
eurozone's second largest. According to forecasts released on Monday
by the Bank of France, French gross domestic product (GDP) is to grow
by only 0.1% in the third quarter of 2008.

Insee, the French official statistics office, confirmed last week
that French GDP decreased 0.3% during the second quarter of 2008,
making the government's forecast of at least 1.7% growth for the full
year look overly optimistic.

France is not the only country with problems, however. The entire
eurozone has been pushed into an unexpected trade deficit in June,
according to figures from the EU's statistical office released on
Monday.

The 15 euro nations bought slightly more goods from trading partners
than they sold during the month, posting a trade deficit of €0.1
billion in June, far from the €7.5 billion surplus seen in June last
year.

The European Union's trade with most of its major partners grew, with
the exception of exports to the USA and Japan, the Eurostat figures
showed.

The largest increases were recorded for exports to Russia (+26%),
Brazil (+21%) and China (+17%), and for imports from Russia (+27%)
and Norway (+25%), both countries being major suppliers of energy.

According to early predictions by Eurostat, GDP in the euro area
dropped by 0.2 percent during the second quarter of 2008. This makes
it the very first time that the monetary bloc's economy declined
since the launch of euro.
========================
THE TIMES 19.8.08
France calls emergency economic meeting
Key meeting today on country's prospects after Bank of France's
monthly barometer of business sentiment falls
Adam Sage and Gary Duncan

French ministers have been summoned back from their holidays for an
emergency meeting in a bid to head off recession after the economy
shrunk for the first time in six years.

But after approving €13 billion of tax reductions last summer,
Francois Fillon, the Prime Minister, had little to offer his
compatriots except long-term structural reform.

He ruled out a cash injection similar to the €20 billion package
ordered by Jose Luis Zapatero, his Spanish counterpart, in an attempt
to pull Spain's economy out of crisis last week.
“We don't need an economic stimulus plan, which would be an
artificial plan,” said Mr Fillon.

He said he would push ahead with implementation of President
Sarkozy's programme, which includes pledges to modernise the economy,
reduce state spending and introduce flexibility into a rigid labour
market.

“We are not relaxing in our effort” to cut public expenditure, Mr
Fillon said.
He added that he would call European Union finance ministers together
in the search for a “common response” to the slowdown.

EU countries should “commence this attempt at coordination which, it
has to be said, hasn't happened yet,” he said.

With the French economy shrinking by 0.3 per cent in the second
quarter and the Bank of France predicting growth of just 0.1 per cent
in this quarter, the country is teetering on the edge of recession.

The meeting in Paris - called in the middle of the sacrosanct Gallic
holiday season - amounted to a tacit admission that the Government
has abandoned hopes of escaping the global economic crisis.

After claiming for months that France would enjoy growth of about 2
per cent this years, Mr Fillon accepted that the figures would have
to be 'adjusted'.
Most economists say the French economy will grow by between 1 per
cent and 1.5 per cent.

The details of today’s Bank of France survey showed a rise in spare
capacity at businesses, which is already above its long-term average
as activity slows.

The results also showed the outlook for the intermediate goods
sector, car making, and consumer goods sectors suggested declines
over the coming months. The only brighter spots were in capital
goods, food and agriculture.

Companies’ order books fell, although orders remained above normal
levels, while stocks of completed goods posted a small rise.

Activity in the market services sector, ranging from hotels to
computer and engineering services, showed moderate growth but the
survey found forecasts pointing to limited growth over the coming
months.

With consumer spending drying up, the trade gap heading towards €50
billion over the past year, and business confidence dropping by three
points in July, Liberation, the left wing daily, said Mr Sarkozy's
dream of kickstarting France was “turning into a nightmare”.
========================
EUREFERENDUM Blog 19.8.08 -EXTRACTS
Things must be bad
There is nothing so sacred as the holiday period in France, when only
a major catastrophe would cause ministers to return to the heat of
Paris. And yet … that is precisely what is happening

While Nicolas Sarkozy gads around on the world stage, giving into the
Russians, his ministers have been summoned back from their holidays
by prime minister Francois Fillon.

However, it seems that Fillon has nothing concrete to offer, other
than an acknowledgement that his government has abandoned hopes of
escaping the global economic crisis. Instead, he is pledging to push
ahead with Sarkozy's programme, which includes modernising the
economy, reducing state spending and introducing flexibility into a
rigid labour market.
(- - - - - -)

Needless to say, the left wing daily Liberation is not being so
generous. Mr Sarkozy's dream of kickstarting France, it says, is
"turning into a nightmare". That is something, undoubtedly, M. Fillon
will be keen to share with the "colleagues".
========================
OTHER ECONOMIC HEADLINES 19.8.08
Telegraph
==Sterling's slide lower accelerates
The pound fell sharply this morning, hitting its lowest level in
almost two years, as the dollar's rebound continued and commodities
weakened.
Sterling has been one of the biggest casualties of the rebound in the
dollar as foreign-exchange traders focus on buying the greenback
against currencies with ailing economies.
Today sterling tumbled almost a cent in early trading in London to
$1.8565 and is now at its weakest in 22 months.
==Sharp US money supply contraction points to Wall Street crunch ahead
By Ambrose Evans-Pritchard
The US money supply has experienced the sharpest contraction in
modern history, heightening the risk of a Wall Street crunch and a
severe economic slowdown in coming months.
Data compiled by Lombard Street Research shows that the M3 ''broad
money" aggregates fell by almost $50bn (£26.8bn) in July, the biggest
one-month fall since modern records began in 1959.
"Monthly data for July show that the broad money growth has almost
collapsed," said Gabriel Stein, the group's leading monetary economist.

Times
==Markets take fright on deepening credit fears
Former IMF chief economist warns of one large US bank failure as
mortgage and financial stocks take a pounding
==M&S redundancy move sparks fears of job losses
Marks & Spencer's plan to slash redundancy benefits for its 60,000
staff by up to 25 per cen

Financial Times
==BOJ cuts economic view as recession spreads
TOKYO, Aug 19 – The Bank of Japan cut its assessment of the economy
for a second month in a row in a sign that a global slump sparked by
the US credit crisis may be spreading too quickly for Japan to avert
recession

Guardian
== World markets braced for further damage
Global sell-off sparked by reports that US government will have to
rescue Freddie Mac and Fannie Mae [US leading mortgage providers -cs]