Economic Crossroads

[toxicpiano 125]

Originally posted by: Hahayoudied I still remember in 2005 when there was one news report warning of a recession that will show up in the future, using facts, but no one cared about the warnings, until now...quote>

Recessions are part of the business cycle, they aren't something new.

[hawkpride147 1]

yes recessions always have been a part of the business cycle...if we let them happen like we should they usually don't last long, and they don't hurt very bad...if we avoid them, then our economy can't avoid hyperinflation which is what a recession helps correct...if you stop having recessions and begin to have an extended period of economic growth, the economy WILL go into a depression. The way the United States economy (and much of the world's too for that matter) is set up, there is an automated hyperinflation prevention built in. it is something that cannot be changed unless you change the type of economy we have. if you prevent the process from occurring, you will eventually get to a point where it is fiscally impossible to avoid due to the immense cost. at that point, you get a depression.

which brings me to the current state of our economy...we are going beyond a recession...we are hitting a full blown depression. a depression will continue until either A. the exact correct opposing economic measure is inacted or B. it reaches a point where the economy has been returned to stability naturally...

the bailout was not the right move...if it was, the DOW would not have dropped another 500+ points today...

we need to look back at the great depression and learn from what they did to endure it and what they should have done...it is possible to have a great depression without having all the issues of the 1930s...but i'm not confident we can endure it with our current president and congress...i can't wait til november shakes this stuff up...

[Boggy1 45]

Ooh, yay.

Stocks slide despite reassurances

The UK's top share index chalked up its biggest one-day points fall ever as Chancellor Alistair Darling attempted to reassure financial markets.

Mr Darling said the government would do whatever necessary to ensure the stability of the financial system but offered no new specific measures.

The FTSE 100, which was launched in 1984, fell 391.1 points, or 7.85%, to close at 4,589.2.

This means that

[Odainsaker 2,134]

Eeek, well, let us hope it does not play out into a full depression, for the way we really dug out of the last one was through the Second World War. Indeed, foreign war has historically been a convenient and expedient means of surmounting domestic economic downturns, be it through the seizure of enemy treasure or economic galvanization from massive military largess trickling-down. War is good for business.

The Dow is again plummetting...lookout Canada, America has bills to pay!

[Jazzmaster 716]

Originally posted by: toxicpiano

Originally posted by: Hahayoudied I still remember in 2005 when there was one news report warning of a recession that will show up in the future, using facts, but no one cared about the warnings, until now...quote>

Recessions are part of the business cycle, they aren't something new.quote>

Well, I will admit to not knowing that until just now...which totally changes my perspective.  Now we have a government trying desperately to end the recession, spending hundreds of billions and making it worse.  I really hope this is like the 1980's, not the 1930's...

[Easy Bakes 253]

They need to withhold those 100s of Billions  and let the  ones that need to crash do so and get it over with.

Throwing  money down a hole is no real solution.

[hawkpride147 1]

amen easy bakes!!! lets hold on to it for a while and then fix everything once we achieve some stability...

[toxicpiano 125]

Originally posted by: Boggy1 Ooh, yay.

Stocks slide despite reassurances

The UK's top share index chalked up its biggest one-day points fall ever as Chancellor Alistair Darling attempted to reassure financial markets.

Mr Darling said the government would do whatever necessary to ensure the stability of the financial system but offered no new specific measures.

The FTSE 100, which was launched in 1984, fell 391.1 points, or 7.85%, to close at 4,589.2.

This means that £93.4bn has been wiped off the value of the index's shares.quote>

What fun!

/sarc.quote>

And I still remember when Gordon Brown that he had put an end to boom and bust.

[Haljackey 17,302]

This is a very interesting report I watched not too long ago.

The USA will no longer be the world's superpower when this is over.  Financial markets will move elsewhere, and the USA will lose its dominant position it has had since the end of WWII.

Its a very interesting broadcast, from CBC's The National.  The video will only be up until about 10:00pm EST tomorrow so watch it before then!

Scroll to about 27 mins in to see the report.

http://www.cbc.ca/national/latestbroadcast.html

"The US will NEVER recover to stand where it has for so long."

"The American Empire is reaching the end of the road."

"This is the end of the superpower status of the US in the global financial arena."

Very interesting eh?  What do you make of it?

Best,

-Haljackey

[Micah 16]

Very interesting eh? What do you make of it?quote>

Sure tons will be proud.

[Easy Bakes 253]

Iceland verges on bankruptcy.

Story Here

[Barbarossa 51]

.

  Edited September 7, 2012 by Barbarossa  

[Aontan 0]

Originally posted by: Barbarossa Moose-olini quote>

 

Good one.

In other news; the first riots in a major city due to the crashes have occurred:

Riots in Hong Kong after heavy stock losses

Wednesday, 8 October 2008 13:34

There have been riots on the streets of Hong Kong following heavy losses at the city's Hang Seng index.

The Hang Seng closed over 8% lower with losses in banks, communications companies and exploration companies.

Customers are trying to get their money out of bank branches and many are protesting about losses related to the collapse of Lehman Brothers.

Earlier, trading on the stock exchange in Jakarta was halted because today's falls were so severe.

Story from RTÉ News:

http://www.rte.ie/news/2008/1008/hongkong.html

quote>

[toxicpiano 125]

Originally posted by: Barbarossa

Originally posted by: haljackey This is a very interesting report I watched not too long ago.

The USA will no longer be the world's superpower when this is over.  Financial markets will move elsewhere, and the USA will lose its dominant position it has had since the end of WWII.

Its a very interesting broadcast, from CBC's The National.  The video will only be up until about 10:00pm EST tomorrow so watch it before then!

Scroll to about 27 mins in to see the report.

http://www.cbc.ca/national/latestbroadcast.html

"The US will NEVER recover to stand where it has for so long."

"The American Empire is reaching the end of the road."

"This is the end of the superpower status of the US in the global financial arena."

Very interesting eh?  What do you make of it?

Best,

-Haljackeyquote>

If Grampy McSame and Moose-olini actually get into office, then I am sure it will come true.  However, if Obama gets into office, I expect that we will slowly return to a position of economic dominance.  Liberal policies are necessary to repair the damage incurred from conservative deregulation and tax policy.  The current economic situation is very precarious, so the speed of said recovery is dependent on many different factors, many of which are beyond the control of the government and the financial sector.  The bailout, as I expected, has done little to assuage the fears that both investors and consumers have about the future.  Time will tell, but I continue to predict that the hardest is yet to come.

Barbarossaquote>

but all liberals are terrorists and a threat to america's security

[hawkpride147 1]

hmmm this bailout doesn't seem to be working...the economy is still sliding quite quickly...as for obama fixing the problem, he has been saying mccain has good ideas, and wants to raise taxes on the people who actually can do something about this and give money to the people who caused it...

I still think we should go with this...

The Common Sense Fix

Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three-step Common Sense Plan.

I. INSURANCE

     a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

     b. In order for a company to accept the government-backed insurance, they must do two things:

          1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.

               a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.

               b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives.

          2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

     c. This backstop will cost less than $50 billion—a small fraction of the current proposal.

II. MARK TO MARKET

     a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

     b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.

III. CAPITAL GAINS TAX

     a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

     b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.

This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess.quote>

Edit: 800th Post!!!

[Haljackey 17,302]

Barbarossa and toxicpiano: You do understand that video was Canadian right? (CBC) Part of it was about the Canadian election, not the American election

[Barbarossa 51]

.

  Edited September 7, 2012 by Barbarossa  

[hawkpride147 1]

@barbarossa: you do realize this likely won't affect america's status in the long run much, if any...the whole world is experiencing this...we're all tied together through macroeconomics (my major)...thus what happens to us affects everyone...and what happens to others affects us...

there are certain exceptions to the macro connections...such as recession proof cities...but they still feel the effect, just nowhere near the same scale as everyone else. they basically operate as if an isolated island in the middle of a nation. Dallas/Fort Worth is one of these cities...yes we feel the effects of companies in NY closing offices, California retail chains closing stores, etc., but we also tend to weather those things better. the housing market has remained steady throughout most of the area...and in some areas, it has actually strengthened. jobs are being created at an incredible rate.

economics is really very fascinating how the tiniest thing can have a massive impact, yet a major thing can make no impact at all...it's all about the connections and relationships withing the economic web...

[Barbarossa 51]

.

  Edited September 7, 2012 by Barbarossa  

[Meg 368]

Originally posted by: Easy Bakes

They need to withhold those 100s of Billions  and let the  ones that need to crash do so and get it over with.

Throwing  money down a hole is no real solution.

quote>

An outrageous series of headlines:

Sep 17, 2008  Another Bailout:  Government Lends AIG  $85 Billion

Oct 9, 2008   AIG Spends $400K on Luxury Retreat after Bailout

Oct 9, 2008   Fed grants AIG $37.8 billion loan

Why should the taxpayers fund this kind of thing?   This is easing the credit crunch?

[TV-VCR 14]

Originally posted by: SkiGeek [

Why should the taxpayers fund this kind of thing?   This is easing the credit crunch?quote>

There's your explanation, Ski.

Chris.

[Boggy1 45]

Well, the Icelandic economy just died.

And unfortunately, most of our Councils (akin to American states) plus other Government services had million of pounds of assets in these failed Icelandic banks. It's doubtfully we will ever see the money again; and most likely both council tax and national tax will have to be raised to compensate.

http://news.bbc.co.uk/1/hi/uk_politics/7660800.stm

[Jazzmaster 716]

AP
Dow jumps 936 as governments pledge bank aid
Monday October 13, 4:59 pm ET
By Tim Paradis, AP Business Writer   Dow soars 936 after major governments pledge to support the global banking system NEW YORK (AP) -- Wall Street stormed back from last week's devastating losses Monday, sending the Dow Jones industrials soaring a nearly inconceivable 936 points after major governments' plans to support the global banking system reassured distraught investors. All the major indexes rose more than 11 percent.

The market was expected to rebound after eight days of precipitous losses that took the Dow down nearly 2,400 points, but few expected this kind of advance, which saw the Dow by far outstrip its previous record one-day point gain, 499.19, set during the waning days of the dot-com boom. The Standard & Poor's 500 index also set a record for a one-day point gains.

There were cheers and applause on the floor of the New York Stock Exchange at the closing bell, and trading was so active that prices were still being computed several minutes after the closing bell, longer than it would take on a quieter day.

Still, while the magnitude of Monday's gains stunned investors and analysts, few were ready to say Wall Street had reached a bottom. The market is likely to have back-and-forth trading in the coming days and weeks -- and may well see a pullback when trading resumes Tuesday -- as investors work through their concerns about the banking sector, the stagnant credit markets and the overall economy.

John Lynch, chief market analyst for Evergreen Investments in Charlotte, N.C., said Monday's rally was encouraging but he doubted it signaled the worst has passed.

"My screen is completely green and I love that, but I'm not doing any backflips yet. We still have many challenges up ahead," Lynch said, noting the ongoing strains in credit markets and forecasts for poor corporate earnings for 2009.quote>

For once, the economy takes a long, deep breath of fresh air...though it did get a break in it's free fall straight for a sharp pile of jagged rocks, we're definitely outta the woods yet with this one.

[Micah 16]

Wow, today was the first day I've ever seen the Dow Jones Industrial Average higher than Canada's TSE 300.

[Aontan 0]

Bank guarantee scheme revealed

Wednesday, 15 October 2008 19:32

The Government has finally released details its controversial bank guarantee scheme, more than two weeks after the plan was first announced.

Minister for the Finance Brian Lenihan said the new regulations would take the Government deep into the banking system.

Under the scheme, taxpayers will guarantee all loans and deposits in the country's banks and building societies.

One of the key provisions contained in the Bill will be measures to prevent abuse of the scheme.

The Government will raise €1bn over two years from the banks covered by the State guarantee. If the guarantee is called upon the banks involved will eventually have to refund the money.

Up to two directors, representing tax payers interests, will be appointed to the board of each bank and building society covered by the scheme.

They will be drawn from a panel approved by the Minister for Finance.

A new committee will oversee bonuses and pay of directors and executives.

Bonuses will be linked to a reduction of risk and long term sustainability of the banks.

Story from RTÉ News:

http://www.rte.ie/news/2008/1015/credit.html

quote>

The guarantee is valued at around €440 billion.

[TV-VCR 14]

Government increases AIG bailout to $150 billion

Mon Nov 10, 2008 8:52am EST

By Mark Felsenthal and Lilla Zuill

WASHINGTON/NEW YORK (Reuters) - The Federal Reserve hiked its support for insurer American International Group Inc to about $150 billion on Monday after an initial bailout attempt failed to stem massive losses.

Under the new plan, the government is putting $150 billion at AIG's disposal, $27 billion more than it extended previously. But the new package will leave the government exposed to billions of dollars of potential losses.

AIG shares rose 24 percent to $2.62 in premarket trade after the new rescue plan was disclosed.

The restructured bailout was announced as AIG posted a $24.47 billion third-quarter loss, the largest in the company's 89-year history, hurt by massive losses on investments and billions of dollars of insurance claims from hurricanes that battered the U.S. Gulf Coast earlier this year.

The Fed will buy $40 billion of AIG preferred shares through the Treasury's Troubled Asset Relief Program (TARP), lend it $60 billion under a credit facility, and provide $50 billion to buy distressed securities and backstop AIG's securities lending portfolio.

The new plan is nearly double the government's initial $85 billion rescue plan for AIG, forged on September 16. The government said its equity stake in the insurer would still be about 80 percent.

The preferred shares will carry a dividend of about 10 percent. The U.S. will charge a lower interest rate on its loan to AIG.

AIG, once the world's largest insurer by market value, received the $85 billion bailout financing from the government in September after counterparties and rating downgrades forced the company to post large amounts of collateral for credit derivatives positions. Last month, $37.8 billion in additional federal funds were put at its disposal under a securities lending agreement. The new plan replaces both of those facilities.

On Monday, the Fed lowered the interest rate on AIG's credit facility to three-months LIBOR plus 3 percentage points from the current LIBOR plus 8.5 percentage points, and extended the term of the loan to five years from two years.

The Fed said in a statement, "These new measures establish a more durable capital structure, resolve liquidity issues, facilitate AIG's execution of its plans to sell certain of its businesses in an orderly manner, promote market stability, and protect the interests of the U.S. government and taxpayers."

AIG Chief Executive Edward Liddy said the terms of the new bailout "create a durable capital structure that will make possible an orderly disposition of certain of AIG's assets" and assure taxpayers are repaid in full with interest.

Credit default swap agreements have led AIG to record $18 billion in losses over the past three quarters. Mounting collateral calls left it severely short of cash.

The U.S. Treasury said its $40 billion investment would subject AIG -- which it called a "systemically important company" -- to the same curbs on executive bonuses and golden parachutes as other financial institutions that receive government capital injections.

AIG reported a third-quarter net loss of $24.47 billion, or $9.05 a share, compared with a year-earlier profit of $3.09 billion, or $1.19 a share.

A year ago, AIG's stock was trading at about $57. It closed at $2.11 on Friday, off an all-time low of $1.25 in the hours before the federal government stepped in with the initial $85 billion loan.

(Reporting by Mark Felsenthal in Washington and Lilla Zuill in New York; editing by John Wallace)

© Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.

Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.

quote>

Yeah! Let's just throw money at the problem! That'll fix it in no time!

[Easy Bakes 253]

*sign*

Throwing good money after bad.

Screw the companies, just insure the customers accounts.

[Shadow Assassin 336]

Shame most governments suck at spending money.

I think that's part of the problem - they simply do not know how to do good economics - throwing money at a problem like that is never the best solution, since it could potentially balloon out.

The best thing to do is to spend money on long-term things, such as infrastructure. I mean, that's also part of how we got through the Depression - there were big, ambitious projects, but at least they gave hope in such dark times. Cases in point: Empire State Building, Sydney Harbour Bridge, and a huge number of other big projects. Most of the really big projects were done in the 30s - many countries built their highway systems around that time as well.

Incidentally, why has debt become such a dirty word in the media? All I ever seem to hear nowadays is that as soon as a government (especially in Australia!) says "we're going to have a massive project coming up soon where we're going to build lots of stuff... but we need money"... the media goes "OMFG, they want to BORROW money"... and of course, because the NSW government has a half-billion dollar deficit, they refuse to borrow money to preserve that "precious" AAA credit rating, even though the state's infrastructure is falling apart.

IMO, the dumbest thing to do (and it's political suicide too) during a recession is to have a budget surplus. Every cent of that surplus should be spent on keeping the country afloat, whether it would be through infrastructure projects (which provide jobs - much needed)... the mere fact that the government is borrowing money to build stuff means that the economy will start working properly again because it keeps money flowing, from the lenders, to the government, to the contractors, to the workers, who then buy stuff from businesses, who then invest their money in the lenders, and so on.

The key to keeping the economy alive is not throwing money at businesses, it should be put into infrastructure renewal, as it is the best way to keep money moving, which keeps the economy alive.

[TV-VCR 14]

Treasury backs away from plan to buy bad assets

Wed Nov 12, 2008 11:51am EST

---

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson on Wednesday said he was backing away from buying troubled mortgage assets using a $700 billion bailout fund, instead favoring a second round of capital injections into financial institutions that would match private funds.

Paulson, in an update on the Treasury's financial rescue efforts, said his staff has continued to examine the benefits of purchasing illiquid mortgage assets under the so-called Troubled Asset Relief Program.

"Our assessment at this time is that this is not the most effective way to use TARP funds, but we will continue to examine whether targeted forms of asset purchase can play a useful role, relative to other potential uses of TARP resources," Paulson told a news conference.

When Treasury was selling the $700 billion bailout plan to Congress, it initially promoted it as a vehicle that would purchase illiquid mortgage assets from banks and other institutions to cushion potential losses.

But it became quickly apparent that setting up such purchases would take time, and Treasury opted for the faster method of injecting capital directly into banks by buying preferred stock. The Treasury has allocated $250 billion of the fund to such purchases so far.

Paulson said the Treasury is evaluating a second program that would provide government investments that would match private investments in capital raisings.

"In developing a potential matching program, we will also consider capital needs of non-bank financial institutions not eligible for the current capital program," Paulson said.

He also said support was needed for the markets that securitize credit outside the banking system for products such as car loans, credit cards and student loans. The Treasury and Federal Reserve are exploring the development of a potential liquidity facility for highly rated AAA asset-backed securities.

"We are looking at ways to possibly use the TARP to encourage private investors to come back to this troubled market, by providing them access to federal financing while protecting the taxpayers' investment," Paulson said.

(Reporting by David Lawder, Editing by Chizu Nomiyama)

© Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.

Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.

quote>

Home values drop for 7th straight quarter

Wed Nov 12, 2008 8:42am EST

---

NEW YORK (Reuters) - Home values in the United States posted their seventh consecutive quarterly decline, with nearly one-third of Americans who sold in the past year losing money, real estate website Zillow.com said on Wednesday.

Home values fell 9.7 percent year-over-year in the third quarter to a Zillow Home Value Index of $202,966, according to the third quarter Zillow Real Estate Market Reports, which encompass 163 metropolitan areas.

Home values have dropped a total 12.8 percent since the market peaked in 2006. Year-over-year declines in the second quarter were 8.8 percent, indicating that price drops continued to accelerate in the third quarter, the reports showed.

The continued declines in value are causing more homeowners to sell their homes for less than the original purchase price.

Over the past 12 months, 30.2 percent of homes sold were sold for a loss, up from 23.7 percent at the end of the second quarter. In 17 markets -- 14 of them in California -- more than half of homes sold in the past year were sold for a loss, the reports showed.

The percentage of homeowners with negative equity remained fairly steady from the second to the third quarter, however, as more foreclosures were completed and as median down payments rose in 61 markets. One in seven, or 14.3 percent, of all homeowners across the country has negative equity, and of homeowners who bought in the last five years, almost one-third, or 29.5 percent, are 'under water', the reports showed.

"The fact that one-quarter of markets in Zillow's third quarter reports show negative or relatively flat annualized change over five years is an indication of the enormous amount of value that has been taken out of the real estate market through home value depreciation in the past few years," Stan Humphries, Zillow vice president of data and analytics, said in a statement.

"It's clear we are at a unique point in history; we've had seven consecutive quarters of decline, and we expect that to continue until at least the middle of next year. Most markets are still seeing five-year annualized returns, but we will see more markets slip into flat or negative long-term change as the economy continues to suffer, factors like job losses begin to further affect foreclosure rates and home values continue to decline," he said.

Foreclosures made up almost one in five, or 18.6 percent, of all transactions in the past 12 months and areas with the highest foreclosure rates are the markets with some of the greatest home value declines. In California's Central Valley, 57.6 percent of transactions in Merced were foreclosures, and in Stockton, foreclosures made up 56.4 percent of transactions. The New York metro area continued to have the lowest rate of foreclosures, with only 3.5 percent of all transactions being foreclosures, the reports showed.

(Reporting by Julie Haviv; Editing by James Dalgleish)

© Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.

Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.

quote>

[Shadow Assassin 336]

Sauce

Eurozone officially in recession

The financial crisis has hit the eurozone worse than had been expected

The eurozone has officially slipped into recession after EU figures showed that the economy shrank by 0.2% in the third quarter.

This follows a 0.2% contraction in the 15-nation area in the previous quarter from April to June.

Two quarters of negative growth define a technical recession.

The news was widely anticipated and follows data showing that Germany and Italy, two of the biggest eurozone economies, are already in recession.

BBC Berlin correspondent Steve Rosenberg said the figures were not a surprise.

Looking ahead, we can expect further quarters of negative GDP growth, until the third quarter of 2009 Gilles Moec, senior economist, Bank of America

"The Germans had their gloomy economic news [on Thursday] and as Germany is the dynamo of the European economy, when there are problems there, it drags the rest of the region down with it," he said.

It is the first recession the region has seen since the euro's creation in 1999.

But analysts forecast worse to come for the countries that use the euro.

"Looking ahead, we can expect further quarters of negative GDP growth, until the third quarter of 2009, simply because so far we have not had in the GDP figures the full impact of the credit market crisis," said Gilles Moec, senior economist, Bank of America.

"We also haven't yet seen the full impact of unemployment on consumer spending," he added, forecasting that the eurozone region will shrink by 1% next year.

European blues

The gloomy forecasts are being fuelled by the uncertainty relating to the financial panic and slowing exports exacerbated by the strengthening euro against the dollar and pound.

Carmakers - major European employers - are suffering particularly badly with data from the European carmakers' association, Acea, showing car sales down 14.5% in October for the sixth month in a row.

The sharp decline in exports has winded Germany - one of the world's largest economies - with data out on Thursday showing it had shrunk 0.5% in the third quarter, following a 0.4% drop in the second quarter.

The Italian and Spanish economies followed suit, also shrinking in the third quarter. For Spain, it was the first such drop since 1993.

Analysts are now convinced that a slump in household spending and a property crisis are likely to push the Spanish economy into recession as well, in the next quarter.

Much to the surprise of most analysts, France's economy bucked the trend and expanded in the third quarter, supported by consumer spending and company investment.

Official data showed that the French economy grew by 0.1% in the June to September period.

More interest rate cuts?

HAVE YOUR SAY

If the biggest eurozone economies are in recession, smaller countries are having even more difficulties

Liliana Jarmela, Portugal

Send us your comments

The European Central Bank this month lowered its key interest rate to 3.25% to kick-start the eurozone's flagging economy and more cuts are expected as it becomes clearer that inflation risks are now retreating.

The Eurostat statistics agency said that annual inflation had come down to 3.2% in October from 3.6% in September, as oil prices have more than halved since reaching a peak above $147 a barrel in July.

Some analysts are predicting they could go as low as 2% - the same level they stood when the eurozone was formed in 1999.

Meanwhile, the wider European Union (EU), made up of 27 countries, is also in danger of slipping into a recession with the region's output shrinking by 0.2% in the third quarter, after flat growth in the previous three months.

Charles Dallara, Institute of International Finance: "We are still in a fragile environment"

The UK is expected to join the roll-call of European countries in recession with a bleak Bank of England forecast earlier this week suggesting that Britain is already there.

Despite a week's worth of grim data, European stock markets rose.

The UK's FTSE 100 was up 3.6% to 4,321 in early afternoon trade, while the German Dax climbed 3.7% and the French Cac rose 2.4%.

The member states of the eurozone are France, Italy, Germany, Belgium, the Irish Republic, the Netherlands, Luxembourg, Spain, Portugal, Slovenia, Malta, Greece, Austria, Finland and Cyprus. quote>

Doesn't sound too good for the Eurozone... but it was bound to happen.