Obama's plan to stimulate the economy is finally at the finish line. After weeks of passionate debates, Obama's plan has almost come into force. The final version has to be reconciled in a joint House-Senate committee before facing final votes in the two chambers. Both the Senate and the House of Representatives have cut the plan by $140 billion (from $927 billion to $787 billion). Despite this, the bill may be considered the first serious victory for the newly elected president. At the same time, some new plans, like Geithner's new financial system rescue plan, emerged as American politicians are trying to save the crumbling economy. All these plans imply spending an additional hundreds of billion dollars for various purposes, which many financial analysts consider economic suicide. Good news only came from China, where officials have spoken about further investments into U.S. government bonds. This at least gives a feeling of stability and a belief in the world's financial system when everything else is falling.
Preliminary 2008 GDP data from the eurozone showed major weaknesses in all of Europe's leaders. The German economy fell 2.1 percent during the 4th quarter and 1.7 percent in all of 2008; France's fell 1.2 percent during the 4th quarter and 1.0 percent over 2008; Italy's fell 1.8 percent during the 4th quarter and 2.6 percent over 2008. Other economic data has been even worse. In December, car manufacturing orders in Germany went down by 40 percent year-on-year. The British trade deficit in December fell because of a drop in imports; in January the unemployment level grew by 80,000 people, reaching a 10-year high. UBS, the largest Swiss bank, has reported 8.1 billion Swiss francs write-downs for the first quarter of 2009, and is getting ready to lay off 2,000 people. In an effort to counteract the crisis, the Swiss government has announced a large-scale economic stimulus program amounting to 700 billion Swiss francs. Germany and Great Britain are also implementing measures to prop the falling economies.
Russia and CIS
Anatoly Aksakov, president of the Association of Regional Banks of Russia, has said that banks are unable to return the loans and therefore they should default and start restructuring negotiations. Russian Finance Minister Alexei Kudrin immediately replied that the government has no such plans. However, he said this might be a situation where actions speak louder when words. The unemployment figures for January have grown so much that they exceeded the government's estimates for the whole of 2009. The federal budget deficit in 2009 might reach 10 percent of GDP, and the government might be forced to spend half of the state reserves to cover the gap. The Russian government is trying to avoid a devaluation of the ruble at any cost 's which in the worst-case scenario might pose a serious threat to manufacturing, send unemployment figures sky-high, and result in a large number of bankruptcies in the banking sector.
*** Written using materials from Bloomberg and Reuters