It’s a depressing spectacle: on both sides of the Atlantic, policy-makers just keep falling short — and the odds that this slump really will turn into Great Depression II keep rising.
In Europe, leaders rejected pleas for a comprehensive rescue plan for troubled East European economies, promising instead to provide “case-by-case” support. That means a slow dribble of funds, with no chance of reversing the downward spiral.
Oh, and Jean-Claude Trichet says that there is no deflation threat in Europe. What’s the weather like on his planet?
Paul Krugman, yesterday
Well Estonia just set a new record this time round, for the sharpest year on year contraction in industrial output seen to date. The Great Depression II is evidently now among us, and it is currently visiting Estonia.
Estonian industrial production fell the most in at least 14 years in January, a further sign that the Baltic economy’s recession may deepen.
Output adjusted for working days dropped an annual 26.8 percent, the most since 1995 when the Tallinn-based statistics office started providing the data, compared with a revised 22.4 percent slump in December, the statistics office said today on its Web site. In the month, output decreased 4.5 percent.
“The contraction of external demand coupled with extremely poor domestic demand dynamics will play a major role in pushing down all economic activities,” Danske Bank A/S said in a note ahead of the report. It forecast a decline of 22.3 percent.
Estonian industrial production fell the most in the 27- member European Union in December as the global credit freeze shut off export demand, exacerbating a slump in consumer spending that began at the start of 2008. Companies including the local unit of Elcoteq Network Oyj, a Finnish electronics manufacturer and Estonia’s biggest exporter, and AS Norma, a seatbelt maker, have been forced to cut jobs and output.
Production of building materials slumped 44 percent in January, the office said. Output of metal products dropped 40 percent and chemicals production fell 38 percent.