A panel of leading economists had warned a day earlier that growth in Germany would come to a halt next year.
‘Deterioration’ in Europe
David Buik, a market analyst at BGC Partners, told Al Jazeera: “The whole world, from the US heading towards the East, has been in denial for a period of three months.
“Data that has been available to the regulatory bodies since September. All these economies have virtually fallen off the cliff and it is all caused by credit or the lack of it.
“Banks are not offering money because their balance sheets have been struggling to maintain equilibrium. Until such time as the inter-bank markets improve, you are going to see a considerable deterioration for the economies of Germany, France, the United Kingdom and the whole of Europe.”
Germany has been hit by weakening activity in its major markets while domestic consumption has remained at low levels.
Corporate investment has suffered in turn from a decline in business confidence.
Udo Steffens, a professor at the Frankfurt School of Finance Management, told Al Jazeera: “Over the past five years, Germany has succeeded in bringing down unemployment from five million to three million people, but unfortunately this is coming to a stop.
“There is a big downturn. We will be around a zero growth rate by next year, and the government is currently initiating an economic support programme of about 12 to 15 billion euros to be invested into different infrastructure projects.”
Shares across Europe fell in Thursday trading, putting them on track for a third straight day of losses as commodity stocks and banks declined.
London’s FTSE 100 index of leading shares was trading down 1.26 per cent to 4129.36 in early afternoon trading, while the German DAX index had fallen by 0.04 per cent to 4618.36.
|BT has said it will cut up to 10,000 jobs, mainly agency and contract workers [EPA]
Also on Thursday, BT Group PLC, Britain’s largest telephone company, announced that it is to cut 10,000 jobs, mainly among agency and contract workers.
BT shares surged 11 per cent after the company announced that it will cut up to 10,000 jobs by the end of March 2009.
Should the cuts be made to their fullest extent, BT’s global workforce will be reduced to 150,000.
The company also announced that its net profit for the second quarter rose 18 per cent.
Last year’s profits were artificially low because of large one-time restructuring costs, and so job cuts were necessary to improve overall profitability, BT said.
Amid the worsening economic climate, the Organisation for Economic Co-operation and Development (OECD) said on Thursday that the US economy will shrink by 2.8 per cent in the fourth quarter of 2008.
The major industrial nations are in a “protracted downturn”, with the US, Japanese and European economies set to contract next year, the OECD said.
The OECD, which is the club of the world’s 30 richest nations, sees its member countries’ shrinking by 0.3 per cent in 2009, following overall growth of 1.4 per cent this year.
The US economy will contract 0.9 per cent in 2009, Japan 0.1 per cent and the eurozone 0.5 per cent, it said.
The US economy will only begin to grow again in the third quarter of 2009, it said.