Governments move to buffer aftershocks

Paris: After easing the financial-market panic by committing trillions of dollars to shore up their banking systems, governments are broadening their focus to buffering its economic aftershocks.

US lawmakers are moving toward the second fiscal stimulus Bill this year and Japanese Prime Minister Taro Aso is set to cut income taxes.

In Europe, Britain's Gordon Brown plans to spend more on schools, Italy's Silvio Berlusconi looks to enact tax breaks for manufacturers and Angela Merkel of Germany mulls tax rebates. French Prime Minister Nicolas Sarkozy on Thursday lifted a tax on business investment until the start of 2010. "Having taken action on the banking system, we must take action on the global recession," Prime Minister Brown told British lawmakers on Thursday. "No country can insulate itself."

Politicians are acknowledging the worst still lies ahead for their economies and their own electoral fortunes unless they act to cushion growth. World leaders will meet in the US on November 15 to review progress in combating the financial crisis and how to avoid a repeat of it.

The cost of borrowing money among banks has fallen after authorities in the US and Europe acted to take stakes in their biggest banks as global stocks plunged and lending seized up.

The euro interbank offered rate, or Euribor, that banks charge each other for three-month loans fell 2 basis points to 4.92 per cent yesterday, the lowest level since June 5, according to the European Banking Federation.

"A global meltdown has been averted and governments, while implementing their respective rescue plans, should now turn their attention to the economy and limit the effects of a global recession," said Geoffrey Yu, a London-based currency strategist at UBS AG. Tensions are easing too late to prevent companies and consumers from retrenching.