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Germany and US offer slim hope crisis might ease

GERMAN business joined the US government today in offering the slimmest of hopes that the global economic crisis might ease, but Britain and Spain showed that millions of people still face huge hardship.

US Treasury Secretary Timothy Geithner said the downturn showed signs of abating while the Ifo gauge of business sentiment in Germany, one of western Europe's hardest-hit economies, rose more than expected -- albeit from a record low.

Economic officials from leading wealthy and emerging nations will doubtless seek "green shoots" of recovery as they start meetings in Washington of the G7 and G20 clubs today. But other European nations showed that the suffering for ordinary people is likely to get far worse.

Britain's economy shrank at its fastest annual pace since 1980, when much of the nation's industry collapsed under the austerity policies of prime minister Margaret Thatcher. In Spain, which until recently was one of Europe's greatest economic successes, the unemployment rate soared to over 17 percent.


Treasury Secretary Geithner said there were signs of improvement in global markets and the world economy but he admitted that the 2009 outlook remained challenging.

"In recent weeks, there have been some encouraging signs that the global economic downturn may be slackening," he wrote in the Financial Times. "Conditions in some financial markets have improved and the decline in world trade may be abating."

Geithner made the comments before the Washington gathering of finance ministers and central bank governors from the Group of Seven big developed nations.

That will be followed by a meetings of the Group of 20 which also includes major developing nations such as China, India and Brazil which are vital players in efforts to drag the world economy out of the mire.

Little is getting better yet, so policymakers can only hope that the freefall is at least over. Germany suggested that a turning point might just be coming into view.

Munich's Ifo economic institute reported that corporate sentiment rose in April to its highest level in five months. Its business climate index, based on a monthly poll of around 7,000 firms, rose to 83.7 from 82.2 in March.

"Is this the end of the crisis? No, it is not, but the freefall of the economy seems to have come to an end, leading to a fragile stabilisation in the second half of the year," said Carsten Brzeski, economist at ING Financial Markets.

Germany's banks made fewer of the catastrophic mistakes that their US and British rivals committed. But its top-end manufacturers have suffered a dive in exports sales as global markets went into recession.


Elsewhere the parachutes have yet to open. Britain's economy shrank no less than 4.1 percent year-on-year in the first quarter this year, data showed today. That marked the biggest annual drop since the end of 1980. Analysts had expected a 3.8 percent contraction.

With Britons reeling from the toughest government budget in a generation earlier this week, the Office for National Statistics reported that GDP fell 1.9 percent on the quarter, the worst since late 1979.

But some economists saw light even in these dark figures. "The period of biggest decline is now past, as business survey suggests the pace of decline is slowing. This is a bad number but there are real signs we are past the low point," said Brian Hilliard at Societe Generale.

In once booming Spain, unemployment soared to 4 million in the first quarter, almost doubling in a year as the recession destroys jobs more quickly than anywhere else in Europe, official data showed. At 17.4 percent the jobless rate leapt from 13.9 percent a quarter earlier, a major embarrassment for Spain's Socialist government.

On the financial markets, European shares were slightly higher but Volvo fell sharply after the world's number two truck maker reported a bigger than expected first-quarter loss.

At 0921 GMT, the FTSEurofirst 300 index of top European shares was up 0.3 percent at 794.51 points. Volvo forecast a huge contraction in demand on both sides of the Atlantic. Its shares lost 5.5 percent.

However, in Asia Samsung Electronics, the world's top memory chip and LCD screen maker, soundly beat forecasts with its quarterly profit.

Samsung said it was too early to bet on a pick up in consumer demand and the economy at large. Asian stocks swung between gains and losses in choppy trade.


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