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Europe

Reports: Europe to Creak Under Deeper Downturn

A bleak economic outlook for Europe and "massive" job losses in both the US and European auto industries are on the cards, data released Monday said.

Flags of member states of the European Union.

EU states are all looking likely to suffer under financial crisis

European share prices shed more than 2 percent of their value on the back of fears over manufacturing data that could show the US and Europe are straining more than expected under the financial crisis.

Anxiety over a more injurious US recession was not helped by further data released Monday that showed car manufacturing in the 15-nation euro zone had sharply slowed.

The data showed that in France, new car sales fell an unadjusted 14 percent in November from the previous year, while in Spain and Sweden sales dropped 49.6 percent and 36 percent respectively.

With the US auto industry also straining under slumping sales, the chiefs of the US "Big Three" -- General Motors, Ford and Chrysler -- have pleaded to congress for a $25-billion (19.4-billion-euro) rescue package to stave off what they say would be an industry-wide collapse.

So sharp is the downturn, General Motors and Ford have made an appeal to the Swedish government for aid to support Swedish car brands Volvo and Saab.

The Swedish government confirmed Monday that GM-owned Saab and Ford-owned Volvo were the subject of talks over the potential aid package, but added that EU competition regulations limited Stockholm's options.

The gloomy results on both sides of the Atlantic have forced the hands of some euro zone central banks, which are expected later this week to announce interest rate cuts to further combat the downturn.

"There will be a plethora of bad news on economic growth, so central banks will need to act boldly to prevent sentiment hitting rock bottom once again," said NAB Capital analyst John Kyriakopoulos.

No 'early end' to recession

Flat picture frames are seen at the stand of a home entertainment company one day ahead of the official opening of the the consumer electronicis fair 'IFA 2008' in Berlin

Retail sales in Germany have fallen as consumers guard their money

Europe’s largest economy, Germany, also received a negative macroeconomic report Monday with news retail sales had fallen by 1.6 percent in October from the previous month.

The data underscores the extent to which consumers are refusing to take their wallets from their pockets in times labeled by most leaders as economically uncertain.

"Germany is in the grip of a recession which will probably be more severe than widely expected," Commerzbank analyst Simon Junker said.

"Private consumption does not appear strong enough to alleviate the recession in Germany or bring it to an early end."

Merkel attacked

German Chancellor Angela Merkel, right, and Ronald Pofalla, secretary general of the CDU

The CDU convention is aiming to bridge division in the party over the financial crisis

German Chancellor Angela Merkel has been accused by opponents of indecisiveness and inaction during the economic downturn.

She sought to counter the charges and division in her own party at a two-day Christian Democrats (CDU) convention in Stuttgart that began Monday, where she also turned down calls for further tax cuts to stimulate the national economy.

Merkel has called for a measured response to the crisis, saying the economic stimulus package enacted by her government should be given time to kick in before further action is taken.

Manufacturing down

Across the euro zone, manufacturing activity hit a record low, with the related index dropping to 35.6 points in November, the Markit research group reported.

Manufacturing in France may have played a significant role in the fall, with its own activity index falling to a worst-ever rating of 37.3 in November.

Leading European stock markets sputtered in mid-day trading Monday, with London losing 2.31 percent, Paris 2.65 percent and Frankfurt 3.26 percent.

Asian markets also fluctuated with Hong Kong and Shanghai gaining 1.6 percent and 1.25 percent respectively but Tokyo and Sydney losing 1.35 percent and 1.6 percent respectively.

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