Business Headlines.
China announces stimulus plan
The Chinese government revealed a £374bn economic stimulus package at the weekend, designed to help revive its slowing economy, reported the Independent. The country plans to loosen credit, cut taxes and spend on its infrastructure over the next two years in investment which amounts to seven per cent of the country’s gross domestic product. Ten areas will see investment in housing, infrastructure and rebuilding, with £9.3bn to be spent in the next three months alone. China’s economy is a quarter of the size of America’s.
UK unemployment set to top 1.8m
Official figures are expected to show that the jobless total has risen above 1.8m, the highest total since 1998, reported the Financial Times. The latest figures are due to be released on Wednesday and it is expected that the dramatic increase in the number will “increase the pressure” on government to cut taxes or raise public spending to support the economy. Analysts expect unemployment to reach 2.7m by the first quarter of 2010, which would see it return to 1994 levels. This would be a jobless rate of eight per cent.
Economy: a trillion reasons to be gloomy 
Markets rally on spending package
Stocks in Asia rallied after China announced a spending package to revive growth in its economy, reported Bloomberg.com. The MSCI Asia Pacific Index added 3.2 per cent, for its first gain in three days. In China, stocks rose 5.2 per cent and in Japan the Nikkei 225 Average "surged" 5.7 per cent, as many of the country's companies gained on the prospect of an improvement in demand. US futures rose strongly after a three per cent recovery in Friday's trading, on hopes of further interest rate cuts. In the UK the FTSE-100 opened up two per cent.
Obama to push ‘big bang’ reform
US President-elect Barack Obama is planning a comprehensive set of social and economic reforms once in office, reported the Financial Times. Rahm Emanuel, the next White House chief of staff, indicated at the weekend that the planned moves would go “beyond an immediate emergency stimulus package” and that Obama viewed the financial crisis as a “historic opportunity” to push through investment. Obama will meet George Bush today and is likely to push for stimulus packages to be passed in Congress.
Rahm Emanuel joins Obama administration
VAT should be slashed says CEBR
The Centre for Economics and Business Research is recommending “drastic” tax cuts and spending stimuli to rescue the economy, reported the Daily Telegraph. The group says that with the bank rescue “starting to unravel” dramatic moves are needed to support the economy, including an early tax cut. It recommends reducing VAT from its current 17.5 per cent to 12.5 per cent until the end of 2009, a measure which it says would “pay for itself”. It also describes the bank rescue plan as “an abuse of government power”.
BoE to predict 1.5 per cent output fall
The Bank of England is to warn this week that the UK is “on the brink of a deep recession”, reported the Guardian. After a “marked” worsening of the economy in recent months the BoE is expected to “slash” growth estimates in its quarterly assessment on Wednesday. In its August report it predicted growth of 0.5 per cent in 2009, now analysts expect a forecast of a one to 1.5 per cent decline. Some economists now expect UK interest rates too fall to as low as one per cent as a result of this type of contraction.
Bank of England's desperate bid for relevance
Forget GDP - it's time for a new measure of human progress
...in brief..................
HBOS bid to be resolved this week and Vodafone to reveal cost-cutting
Jim Spowart, the founder of Intelligent Finance, who is involved in an alternative bid for HBOS, is to “put up or shut up” this week, said the Independent. He said that negotiations are still “ongoing” but the City is sceptical about the likely success of any offer…………
Santander, the Spanish owner of Abbey, Alliance & Leicester and Bradford & Bingley, is under pressure to raise capital. Spain will be on its own in resisting recapitalisation, now that Italy is working on a plan and analysts expect Santander to raise funds soon…………
Latvia bailed out its second biggest bank at the weekend and may soon need to turn to the International Monetary Fund, said the Daily Telegraph. As the financial crisis “engulfs” the Baltic and Scandinavian regions, Premier Godmanis announced that Parex Banka had been nationalised…………
American International Group, the US insurer bailed out with a $85bn loan in September is to receive extra funds. It will see its loan cut to $60bn, but in addition the government will buy $40bn of preferred shares and $52.5bn of mortgage securities the company backs or owns…………
AIG rescue and the Goldman Sachs connection
Temporary staff are being fired across Europe, as companies across the region start to feel the fall-out from the economic crisis, said the Financial Times. “Tens of thousands” of staff are being let go in an early indication of the pain to come for full-time employees…………
New Vodafone chief executive Vittorio Colao will reveal details of a fresh cost-cutting plan this week. Analysts believe that as much as £1bn could be stripped from the company’s cost-base, involving up to 20 per cent of its workforce in western Europe…………
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