WASHINGTON (Reuters) - Japan became the latest major economy to fall into recession and Citigroup said on Monday it would cut 52,000 jobs, one of history’s largest layoffs, stoking fears the global economic slump is worsening.
After a weekend meeting of the Group of 20 advanced and emerging economies failed to come up with specific new measures to ease the world’s financial strains, the IMF said it needed at least $100 billion in extra funding to fight the crisis.
Citigroup, the U.S. bank with the farthest global reach, announced the biggest round of job cuts since the financial crisis erupted last year, slashing 15 percent of its workforce in a bid to return to profitability.
The cuts come on top of 23,000 reductions Citigroup had already announced and lag only the 60,000 layoffs by IBM in July 1993 as the largest ever, according to outplacement firm Challenger, Gray & Christmas Inc.
After stock markets closed, the U.S. Treasury said it had completed equity purchases in 21 more banks totaling $33.56 billion, including $6.6 billion in U.S. Bancorp. Life insurers also joined the long list of companies seeking funds under Washington’s $700 billion financial bailout program.
Seeking to contain the economic fallout for the U.S. auto industry, Democratic lawmakers proposed a politically potent plan to bail out big American car firms. But its passage is uncertain even with millions of jobs at stake.
Automakers have taken the brunt of the impact from a dramatic decline in U.S. consumer spending, triggered by the housing crash and worsened by rising unemployment. Germany said it was ready to guarantee funds for General Motors’ Opel unit. Even Japan’s Toyota came under ratings scrutiny as signs of recession spread across the globe.
The United States fell into a recession in April and the downturn is expected to last 14 months, with unemployment reaching 7.7 percent this year, according to a survey of private forecasters by the Federal Reserve Bank of Philadelphia.
That would be the longest contraction since the 16-month recession that ended in 1982, according to the National Bureau of Economic Research. The organization has not declared a recession this year, in part because output expanded in the second quarter, fueled by economic stimulus plan payments.
A top Senate aide said another stimulus plan was not likely to be approved during Congress’ post-election session this week, the last time lawmakers are to meet in 2008.
In Britain, the main employers group forecast that joblessness could rise to almost 9 percent by 2010, and France’s central bank said the French economy should contract 0.5 percent in the fourth quarter.
The euro zone is already in recession, usually defined as an economy shrinking for two consecutive quarters.
Japan surprised markets with data showing the world’s second-biggest economy was in its first recession in seven years as the worst global financial crisis since the Great Depression curbed demand for exports. The 0.1 percent contraction in July-September was worse than forecast.
China’s central bank said the risk of a downturn in its economy was rising, and it also warned that the global slowdown could hurt its exports.
International Monetary Fund Managing Director Dominique Strauss-Kahn told the BBC his organization would likely need at least $100 billion in extra funding over the next six months to help countries survive the downturn.
U.S. Senate Democrats proposed a plan to provide $25 billion of the $700 billion financial fund as loans for the nation’s “Big Three” automakers, General Motors Corp, Ford Motor Co and Chrysler LLC.
But they face a difficult fight in obtaining enough votes to pass the scheme, especially as lawmakers will be in session for just a few days this week.
The outgoing Bush administration and some congressional Republicans want Congress to adopt an existing $25 billion loan program that specifically targeted the industry, rather than tap the financial bailout funds for carmakers.
The German government said it was ready to guarantee funds for ailing carmaker Opel, the first European carmaker to turn to a government for help. But any money it provides to the GM unit must stay in Germany.
Fitch Ratings put Japanese car giant Toyota Motor Co on a negative ratings watch because of the global downturn, stronger yen and challenges in the auto industry. Toyota is one of the rare companies to have a top-notch “AAA” rating.
Markets were unimpressed with the weekend meeting of the G20 in Washington, which agreed on some steps to tackle the world economic crisis but left it to individual governments to tailor their responses to their own circumstances.
Major U.S. stock indexes all closed down more than 2 percent on Monday, after stocks in Europe and Asia also ended lower.
Commodities also slumped on weak economic news. Oil lost more than 3 percent as concerns about demand offset evidence of OPEC output cuts and the hijacking of a Saudi Arabian supertanker. Economic concerns supported safe-haven demand for government bonds on both sides of the Atlantic.
“The economic outlook is worrying and no solution has been found short term,” said Simon Wardell, analyst at economic consultants Global Insight.
Additional reporting by Reuters bureaus worldwide; Editing by Dan Grebler