Britannia Radio

The IMF has produced its report.  Despite all the government 'spin' 
Britain is to come worst out of the whole recession.  Alastair 
Darling's predictions only 2 months ago in the "Pre-Budget Report" 
are now seen as wildly optimistic.

Throughout the crisis almost all forecasts have been proved wrong so 
it clearly is not wise to act on these either !!

Of these reports the FT's is by far the most profound for Britain.  
The first two give the headline story but the devil - as usual - is 
in the detail in the FT.

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BBC ONLINE   28.1.09   at 1420 hrs
World growth 'worst for 60 years'

World economic growth is set to fall to just 0.5% this year, its 
lowest rate since World War II, warns the International Monetary Fund 
(IMF).

In October, the IMF had predicted world output would increase by 2.2% 
in 2009.

It now projects the UK, which recently entered recession, will see 
its economy shrink by 2.8% next year, the worst contraction among 
advanced nations.

The IMF says financial markets remain under stress and the global 
economy has taken a "sharp turn for the worse".

'Virtual halt'
The outcome, it says, has been to send global output and trade 
plummeting.

+++++++++++++++++++++++++++
  The current projection is a protracted recession and we have not 
reached the bottom yet
Justin Yifu Lin, World Bank
+++++++++++++++++++++++++++

"We now expect the global economy to come to a virtual halt," said 
IMF chief economist Olivier Blanchard in a statement.

The IMF says that despite a number of policy moves, which have been 
carried out by many states, financial strains remain.
International co-operation is needed now to draw up new policy 
initiatives, and for capital injections to support "viable financial 
institutions".

Meanwhile, it predicts that the eurozone economy is poised to shrink 
by 2.0% in 2009 and the US economy by 1.6%.

Banking crisis
The report comes on the same day the International Labour 
Organization said that as many as 51 million jobs worldwide could be 
lost this year because of the global economic crisis.

It had been hoped that growth in developing nations would continue at 
a steady pace and help offset the recession in developed nations such 
as the US and UK.

But the seemingly endless crisis in the banking system has put paid 
to that notion.

Countries such as China are now struggling with a collapse in demand 
from their primary export markets.

Meanwhile, developed economies such as Japan, Spain, the US and UK 
are in recession, with new job losses being announced on a daily basis.

'Uncertainty'
The IMF says that growth in emerging and developing economies is 
expected to slow sharply, from 6.25% in 2008 to 3.25% in 2009.
It cites the main reasons for the drop as being falling export 
demand, lower commodity prices and much tighter external financing 
constraints.

+++++++++++++++++++++++++++
  If the recession deepens in 2009, as many forecasters expect, the 
global jobs crisis will worsen sharply
International Labour Organization
+++++++++++++++++++++++++++

The IMF points out that policy efforts to tackle the downturn so far 
- such as liquidity support, deposit insurance and recapitalisation - 
have been drawn up to address the immediate threats to financial 
stability.

However, it says that these emergency measures "have done little to 
resolve the uncertainty about the long-term solvency of financial 
institutions".
"The process of loss recognition and restructuring of bad loans is 
still incomplete," says the IMF's World Economic Outlook Update.

'Bad bank'
The IMF says future co-ordinated financial policies should 
concentrate on recognising the scale of financial institutions' 
losses and on providing public support to those institutions that are 
viable.

"Such policies should be supported by measures to resolve insolvent 
banks and set up public agencies to dispose of the bad debts, 
including possibly through a 'bad bank' approach, while safeguarding 
public resources."

The IMF says the global economy is projected to experience a gradual 
recovery in 2010, with growth picking up to 3%.
"However, the outlook is highly uncertain, and the timing and pace of 
the recovery depend critically on strong policy actions," it warns.
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SKY NEWS      28.1.09 at 1.59 pm
UK To Be Worst Hit By Slowdown

The International Monetary Fund is forecasting that the UK economy 
will shrink the most of all developed nations this year.

The IMF says international economic cooperation will be critical

The IMF believes that Britain's output will contract by another 2.8% 
over the next 12 months, with a stuttering growth of 0.2% projected 
for 2010.

This is in contrast to predictions from the Treasury.

Chancellor Alistair Darling, in the pre-budget report, set out that 
forecasts that the UK economy would shrink between 0.75% and 1.25% 
this year.

+++++++++++++++++++++++++++
There is a world downturn but our economy is sinking further and 
faster than the rest.
Conservative leader David Cameron MP
+++++++++++++++++++++++++++

Globally this year, the IMF believes growth will fall to 0.5% - the 
lowest rate since the Second World War.

In its World Economic Outlook the IMF says: "Despite wide ranging 
policy actions, financial strains remain acute, pulling down the real 
economy.
"A sustained economic recovery will not be possible until the 
financial sector's functionality is restored and credit markets are 
unclogged."

+++++++++++++++++++++++++++
IMF Predictions
. :: UK economy to shrink by 2.8% in 2009
. :: US economy to shrink by 1.6%, Germany 2.5%, France 1.9%, and 
Japan 2.6%
. :: UK economy to grow by 0.2% in 2010
. :: Global growth will fall to 0.5% in 2009, lowest rate since 
World War II
. :: Global growth in 2010 will be 3%
IMF predictions for 2009.
++++++++++++++++++++++++++++++++


The IMF outlines that more will need to be done by governments across 
the world in addition to monetary and fiscal policies already 
implemented by many nations.

The global financial body says more international co-operation in 
implementing these policies will be critical to ensure a global 
economic recovery.

Unlike the minimal recovery expected in the UK, the global economy in 
2010 is expected to grow by at least 3%, helped by, "efforts to ease 
credit strains as well as expansionary fiscal and monetary policies".
===========================
FINANCIAL TIMES   28.1.09
UK needs £20bn a year to repair finances, IFS warns
By Norma Cohen, Economics Correspondent

The UK will need to raise taxes or introduce spending cuts worth an 
extra £20bn annually by the end of the next parliament if it is to 
repair public finances to the level forecast in November's pre-Budget 
report, according to the Institute for Fiscal Studies.

In its 2009 Green Budget, an annual analysis of fiscal policy, the 
IFS concluded that even with spending cuts and tax increases of that 
magnitude, public sector debt may not be able to return to pre-crisis 
levels for more than 20 years.

It concluded that the spending cuts and higher taxes signalled by 
Alistair Darling, the chancellor, in his pre-Budget report, even if 
they work as the Treasury envisaged, would have to remain in place 
until the early 2030s before debt returns below the ceiling of 40 per 
cent of national income that Gordon Brown set as one of his two 
fiscal rules in 1997.

"So there is no prospect of a government being able to readopt these 
rules any time soon," the IFS said. "We hope they will be reformed in 
any event."

The IFS estimates that the Treasury's own figures suggest that the 
credit crunch will cost the exchequer the equivalent of 3.5 per cent 
of national income - equal to a little over £50bn in today's money - 
in lost tax revenue from individual and corporate earnings and in 
higher spending on social security.

In producing its document, the IFS noted that the average view among 
macroeconomic forecasters is that the recession will be deeper and 
longer than the Treasury thought at the time of the PBR. Mr Darling 
has also since hinted that he, too, believes the forecast will have 
to be revised to take account of the severe weakening in demand seen 
late in the fourth quarter of 2008.

But the IFS notes that although a longer, deeper recession will push 
government debt and borrowing further above the PBR forecasts, and it 
may prove unsettling for investors but may not necessarily increase 
the level of government borrowing and tightening of fiscal policy in 
the longer term.

Morgan Stanley, which is presenting the Green Budget in partnership 
with the IFS, notes that while sums quoted for intervention in the 
financial system are very large, actual taxpayer losses are most 
likely to be very small, and there may even be a profit. However, 
there are greater chances of big losses than big profits.

The Green Budget points out that currently, the impact of rising 
public sector net debt is limited because government is able to 
borrow relatively cheaply. There is considerable demand from banks 
and financial institutions for liquid, risk-free instruments.

However, there is a risk that investors will become frightened by the 
size of government debt and demand much higher yields on government 
bonds. If borrowing costs were to return to the average levels of the 
1990s, then further tax increases or spending cuts would be needed to 
stop debt and interest costs rising unsustainably, the IFS said.
===========================
ECONOMIC 'Shorts'   28.1.09

TELEGRAPH
=George Soros admits renewing attack on pound
Billionaire investor who brought Bank of England to its knees says he 
is shorting the British currency again.
=Debt from economic crisis will remain for decades
British children will be paying off the cost of the current economic 
crisis well into their thirties, a think tank has forecast

TIMES
=Auditors grilled on banking crisis
The government to probe bank auditors

FINANCIAL TIMES
=Davos kicks off amid deep gloom
Participants see no quick fixes and warn of protectionism
=GKN adds to auto industry gloom
Engineering group sheds further 1,400 jobs
=British car makers urge Mandelson to do more
Car makers and union representatives emerged from an industry summit 
with business secretary Lord Mandelson calling for more to be done to 
rescue the British car making sector
=Brown told to curb 'blizzard' of initiatives
Labour MPs have warned Brown that people are becoming confused by a 
stream of measures to fight the recession and have lost track of how 
much they cost and whether they work - Jan-27
=Public rejects tax and spending increases
Appetite for higher tax and spending appears to have been sated, says 
the latest findings of the British Social Attitudes Survey. But 
support for a slash-and-burn approach remains low

BBC ONLINE
=WALL STREET JOURNAL

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POLITICS HOME    28.1 09
COMMENTS
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BBC News at 12:47
Pre budget report forecasts "pretty cautious" says Treasury minister

Stephen Timms, Financial Secretary to the Treasury

Mr Timms defended govenrment's forecasts for the public finances, 
despite suggestion today of potential shortfall, saying the 
government had been "pretty cautious".

He said that the figures discussed in the pre-budget report were 
"pretty cautious forecasts - certainly they were not over optimistic 
forecasts".

"Thats the approach we want to take to ensure we get through this in 
the best possible shape," he said.

However he said that the government would need to revise its 
forecasts for the public finances in this year's budget.

"Things are changing, that is true and we will need to up date them 
when we get to the budget," he said.

12:55 Sky News

Later Mr Timms said that while public borrowing was set to rise, the 
government was still committed to "prudent management of public 
finances".

"What's happening around the world is borrowing on the part of 
governments is going up and we've set out how in the UK starting from 
a position of low debt compared to other countries our debt will need 
to rise as well," he said.

He added: "We have made very, very clear our determination to have 
prudent management of the public finances and that will continue to 
be our priority".

He also stressed that today's Institute for Fiscal Studies report had 
welcomed that government's fiscal stimulus would help shorten the 
recession.

"It is important that the Institute of Fiscal Studies is welcoming is 
the fact and recognises the fact that to do nothing would cost a lot 
more than the action we are taking and confirmed that as a result of 
what we've done we should be able to avoid a deep and prolonged 
recession," he said.


13:10 World at One, Radio 4

Speaking shortly afterwards, Mr Timms said that the government's 
action would keep the public finances "on track".

"Our starting point was debt below 40% we've set out how we are going 
to get back to balance in the medium term by 2015 and we've taken 
pretty decisive action to keep the economy and keep public finances 
on track," he said.

However he said that changes in the economic situation since the pre-
budget report and in the longer term would need to be accounted for.

"If by the time we get to the budget there are changes in the 
numerous [sic - ? numbers?]  then those will be reflected in the 
forward path at the times," he said.

He added: "In the longer term we'll have to see what happens".
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The World at One, Radio 4 at 13:22
UK will not be another Iceland, says Baroness Neville-Jones

Baroness Neville-Jones, Shadow Security minister

Baroness Neville-Jones said that despite the deterioration in the 
public finances would not suffer a similar fate to Iceland.

"This country is strong, big country we are not actually going to be 
an Iceland, that's not what's going to happen," she said.

"We are in a very, very serious situation and our public finances are 
extremely fragile," she added. "This is far from being a strong 
situation, it's a very perilous one for us"

She also suggested the Prime Minister was "in denial" by trying to 
blame the economic situation solely on the American banking crisis.

"Gordon brown is still in denial about the contribution his economic 
polices have made to the depth of this recession," she said.
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Sky News at 12:50
Simpson: Car rescue package doesn't go far enough

Derek Simpson, Unite

Mr Simpson said that although he welcomed the series of measures to 
announce the car industry announced yesterday, it didn't go far enough.

"We welcome the move, and hope that it is the start, rather than the 
finish.

"What has emerged is that the car manufacturers are seriously 
concerned about job losses. The measures don't go far enough, and 
certainly don't match what the European competition is doing.

"I think Lord Mandelson is perhaps a little bit disappointed that 
there's not more enthusiasm from us.

"I think if you took an optimistic view, there's a view that the 
government will support the motor manufacturing industry, and look to 
save jobs. But there is no concrete guarantee."

Asked whether he thought Lord Mandelson was considering further help 
for the motor industry he said, "I think he has to be, because we 
cannot afford to let this sector go under. These are viable 
companies, with skilled workforces."