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Business

World Economic Outlook Gloomier as Markets Take Another Hit

A world economic confidence index released Thursday dropped to its lowest level in 20 years amid further news of heavy losses on global markets and an ongoing crisis among the world's carmakers.

Stocks drop on the Frankfurt stock exchange

All roads lead to global recession, the confidence index says

The index, drawn up by German institute Ifo, was released as fears of a looming global economic recession grow.

The Munich-based Ifo institute said global economic confidence fell in this year's fourth quarter to 60 points from 73.4 points in the third quarter.

"Altogether the data points to a global recession," the institute said releasing the report, adding that expectations for the coming six months have worsened further.

"The cooling off in the ... world economic climate has this time affected not only the major economic regions of North America, Western Europe and Asia but also Central and Eastern Europe, Russia, Latin America and Australia," Ifo said as the fallout from the financial crisis spreads around the world.

Based on a survey of about 1,000 analysts in 91 countries, the survey's fourth-quarter decline took the closely watched index down to well below its long-term average of 96.8.

Bad tidings for global economy

The release of the Ifo survey came in the wake of a new grim warning from the US Federal Reserve about the outlook for the US economy and another share sell-off around the world.

US consumer prices took their most precipitous one-month drop in 61 years, while in Japan, exports fell at their fastest pace since 2001.

European stocks plunged to five-year lows early morning Thursday as market trade in London, Paris and Frankfurt all dropped by more than 2 percent.

The losses followed another treacherous day on Wall Street and sharp losses in Asia.

A Rolls Royce employee working on a MIG Rolls Royce plane engine

Rolls Royce is cutting staff from its plane engine manufacturing arm

More job cuts

The continuing downturn has not done any favors for the struggling auto industry, either.

France's PSA Peugeot Citroen announced it would cut 3,550 jobs, and Britain's Rolls-Royce, which is also a maker of plane engines, said it would cut up to 2,000 jobs worldwide.

While in Japan, Isuzu Motors said it would cut 1,400 jobs and downscale domestic production by 10 percent.

In the US, the chiefs of General Motors, Ford and Chrysler warned of a "catastrophic collapse" of the industry if the government did not approve multibillion-dollar loans for the auto giants.

Governments' new moves

As global markets were further strained Thursday and the crisis among automakers deepened, governments were prompted to take further measures to soften the blow to their economies.

French President Nicolas Sarkozy has outlined a sovereign wealth fund to plug any holes that could lead to the collapse of major French companies or expose them to foreign buyouts.

Sarkozy's plan to "intervene massively" in companies of strategic national importance earned sharp criticism from neighbor Germany.

German Chancellor Angela Merkel, left, chats with French President Nicolas Sarkozy

Germany rebuked France for its renewed protectionist policies for French firms

Germany's influential central bank warned in its latest monthly bulletin that Europe's biggest economy faces tough times in the run-up to the end of the year.

In Britain, auto industry groups notched up pressure on Gordon Brown's government to deal out loans and guarantees to British automakers to protect them from the credit squeeze.

While in China, Yin Weimin, the country's social security minister, said the Asian giant was facing serious unemployment problems due to the economic crisis.

"Currently, the employment situation is critical, and this impact (of the crisis) is still unfolding," he said.

The government in Beijing said it would provide substantial financial aid to help light industry employers maintain staff, and implement tax cuts aimed at helping the textile industry.

Light industry in China employs an estimated 40 million people.

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