Europe battered anew

Emilio Botin, chairman of Spanish banking group Santander Central Hispano, speaks at a recent conference in Madrid. European banks were counting at the weekend the damage from the investment scandal involving New York trader Bernard Madoff.Photo: AFP

The economic crisis bit ever deeper into European industry on Tuesday as world markets held their breath for an expected record cut in US interest rates and the dollar dipped again.
European automakers association ACEA reported a plunge of more than a quarter in new car sales in the EU in November, while Russia said industrial output slumped by 8.7 percent the same month.
"The collapse has become clear," ran a headline in Kommersant newspaper in Moscow, referring to the worst industrial data result since the financial crisis that tore its way through the economy in 1998.
The news from Russia's ex-Soviet neighbour Ukraine was even more alarming.
President Viktor Yushchenko said economic contraction in the first quarter of 2009 could be as high as 10 percent amid a crisis in the banking system and a slump in demand for steel, Ukraine's main export.
In Europe's biggest economy, Germany, the Frankfurter Allgemeine Zeitung quoted a government memo saying 2009 contraction could be three percent or more, which would be the worst recession in Germany's post-war history.
South Korea also cut its 2009 economic growth forecast by one percentage point to three percent, with President Lee Myung-Bak telling the cabinet that "next year will be the most difficult year, especially the first half."
Economists in China warned Asia's largest economy could end 2008 with the weakest quarterly growth in nearly two decades, and French global luxury group Louis Vuitton announced it was scrapping plans for a flagship store in Tokyo because of a slump in demand.
The gloomy economic news came as the fallout continued from a massive alleged scam run by Wall Street figurehead Bernard Madoff, which could force some of the world's biggest banks to wipe billions off their balance sheets.
London-based HSBC, Spain's Santander and Fortis Bank Netherlands alone revealed potential losses of more than five billion dollars as a result of the pyramid scheme fraud, which has turned the spotlight on US market regulation.
In a further sign of widespread uncertainty, world stock markets were mixed as investors awaited a US Federal Reserve decision that some analysts forecast would see interest rates cut close to zero in a bid to stimulate lending.
A meeting of the Federal Reserve was expected to end at around 1915 GMT.
Ahead of the announcement, European Central Bank (ECB) president Jean-Claude Trichet urged banks to pass on the ECB's historic interest rate cuts to the eurozone economy, suggesting the central bank might mark a pause in the cuts.
Now "we have to get it in the real economy," Trichet said late on Monday.
In late morning trading in Europe, the Frankfurt stock market advanced 1.59 percent, London gained 0.96 percent and Paris added 1.52 percent in value.
In Asia, Tokyo closed 1.12 percent down and Sydney lost one percent owing to caution over the weak economy and the Madoff fraud scandal, dealers said.
In other market developments, the dollar fell. In mid-day trading in Europe it stood at 1.3643 dollars, down from 1.3695 dollars late in New York on Monday. Against the Japanese currency, the dollar dipped to 90.31 yen from 90.63 yen.