Economic stimulus plans now global phenomenon
At least 34 countries have plans, worth a total of $2.25 trillion.
Economic stimulus packages have gone global.Skip to next paragraph
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While Congress is still arguing over the size and shape of the US package, at least 33 other nations have started programs that are far more ambitious than were planned even a month ago.
Many are oriented toward spending on roads and other transportation projects, such as China’s plans to build or renovate airports, subways, and railroads. Others are providing tax cuts for consumers and businesses, as is the case in Canada and Brazil. Russia is trying to restructure the massive debt hanging over its corporations. Some countries, such as France, are aiming the stimulus at key industries, including Airbus, the giant aerospace manufacturer.
Without the multiple stimulus plans, which one investment bank, UBS, estimates to be equal to 2.8 percent of the world’s gross domestic product, the global economy would be in far worse shape, economists suggest.
“Without the stimulus, there is a fair likelihood we would be in more than a ‘Great Recession,’ ” says Sung Won Sohn, a professor of finance at California State University, Channel Islands. “It will keep us from dropping further.”
The global response, which now comes to $2.25 trillion, is larger than any other government effort in a postwar recession, says economist Nariman Behravesh of IHS/Global Insight in Lexington, Mass. “And frankly, we need more,” he says, noting that more half of the spending will come from two nations – the US and China.
“For a lot of the European economies, the stimulus packages will be 1 percent to 2 percent of GDP, the same with Japan. And from my perspective, it needs to be bigger in those economies,” says Mr. Behravesh.
For example, France’s economic stimulus package totals 26 billion euros, 1.3 percent of French GDP. Although it includes hundreds of smaller infrastructure projects, such as repairing the roof of the Cathedral of Notre Dame in Paris, a significant amount of the effort is aimed at large businesses such as Airbus and Areva, the nuclear giant.
“The bulk of the spending is for research and innovation to boost investments in the private sector,” points out Adrien de Tricornot, financial columnist for Le Monde.
As is typical of the approach of French President Nicolas Sarkozy, much of the state funding for the private sector will be matched by industry itself – which analysts say helps to keep the public ownership question off the table.
The US is not the only country where the shape of the spending package is controversial.
The Japanese approach – its second fiscal package this fiscal year – includes a controversial cash payment of $135 for every resident. According to a poll in the major daily Mainichi two weeks ago, 74 percent of those surveyed oppose the handouts. Former administrative reform minister Yoshimi Watanabe quit the ruling LDP in mid-January, saying the cash would be better spent on local governments.