Governments struggle to cope with rising unemployment
2008-11-20

Category Unemployment Benefits Sovereign Wealth Fund Nations Sweden South Korea France Spain City Seoul Paris Category Regions Regions Europe Ile-de-France People Nicolas Sarkozy Harry Reid George W. Bush Hu Jintao Event Global Financial Crisis Company Rolls-Royce AstraZeneca

WASHINGTON (AFP) - Companies worldwide slashed jobs Thursday as the global financial crisis deepened, leaving authorities scrambling to cushion the blow and prompting the launch of a French state investment fund.

In the United States, initial claims for unemployment benefits shot up to a 16-year high last week as the world's largest economy appeared to be sliding into a deep recession.

The White House said President George W. Bush would be willing to extend unemployment benefits if Congress were to approve such a measure.

News of an imminent Senate bailout deal for the crippled US auto industry briefly pulled Wall Street out of a deep sell-off in roller-coaster trading.

Congressional aides said senators had reached a bipartisan agreement on a bill to support the ailing auto industry, after executives from the biggest carmakers begged Congress for an additional 25-billion-dollar bailout.

But Democratic leaders in the Senate and House of Representatives later said there was no plan to rescue the crisis-hit "Big Three" automakers that could pass through Congress. US stocks plunged anew, after slumping to five-and-a-half-year lows Wednesday.

Senate Majority leader Harry Reid said it was a "sad reality" there was not yet sufficient support for a rescue plan to pass and said a measure could be reconsidered in December.

"The executives of the auto companies have not been able to convince the Congress or the American people that this government bailout will be its last," Reid told reporters.

Global markets suffered more heavy losses as the grim news piled up, with more job losses announced by automakers and other companies and Japan reporting exports fell at the fastest pace in seven years.

The wider impact of the financial crisis on the auto industry was highlighted when France's PSA Peugeot Citroen announced plans to slash 3,550 jobs and Japanese firms Mazda and Isuzu Motors said they were scrapping a total of 2,700 jobs.

The Peugeot job losses could affect assembly-line workers, managers and office staff in all plants, the company said in a statement.

The auto sector plays a strategic role in the French economy and directly or indirectly accounts for one in 10 jobs there.

France's President Nicolas Sarkozy unveiled a 20-billion-euro (25-billion-dollar) investment fund to shore up key French companies hit by the economic crisis and protect them from foreign predators.

The amount was far below the 100 billion euro launch mooted last month when Sarkozy first announced the measure as a French version of a sovereign wealth fund.

In Britain, the Society of Motor Manufacturers and Traders and the Retail Motor Industry Federation called on the government to shield the British auto sector from a credit squeeze through loans and possible guarantees.

Rolls-Royce, the British maker of airplane engines, said it planned to cut up to 2,000 jobs worldwide in 2009. British defence manufacturer BAE Systems said it was cutting 200 jobs as its workload was "tailing off."

And the Anglo-Swedish pharmaceuticals giant AstraZeneca said it would slash 1,400 jobs by 2013 as it shuts factories in Belgium, Spain and Sweden.

The jobs gloom accelerated the downward spiral of global stocks.

All European stock markets plunged during the day, with London's FTSE 100 closing 3.26 percent lower, Frankfurt's DAX losing 3.08 percent and the CAC 40 in Paris down 3.48 percent.

In New York, the Dow Jones Industrial Average was down a hefty 3.19 percent half an hour before the market close.

Dealers' screens had been red across Asia, with stocks dropping 6.9 percent in Tokyo, 6.7 percent in Seoul and 4.2 percent in Sydney.

A top Chinese official warned the Asian giant was facing serious unemployment problems due to the global economic crisis.

"The employment situation is critical and this impact (of the crisis) is still unfolding," said Yin Weimin, the social security minister.

Yin said the government would provide financial aid to help firms maintain employment, especially in light industry which employs up to 40 million Chinese, as well as tax cuts aimed at helping the textile industry.

Chinese President Hu Jintao however insisted that his country's economic fundamentals remained strong.

"We can overcome these difficulties and manage to maintain fast but stable economic growth," he said while in Lima for a summit of Asia-Pacific leaders.

The 21 Asia-Pacific economies making up half of world commerce warned against protectionism and urged a quick breakthrough in the World Trade Organization negotiations to beat the financial crisis.