Europe

China called for the creation of a new currency to eventually replace the dollar as the world's standard, proposing a sweeping overhaul of global finance that reflects developing nations' growing unhappiness with the U.S. role in the world economy, The Wall Street Journal reported. The unusual proposal, made by central bank governor Zhou Xiaochuan in an essay released Monday in Beijing, is part of China's increasingly assertive approach to shaping the global response to the financial crisis. Mr.

The German economy will shrink 6% to 7% this year, Commerzbank forecast on Monday, result that would put the country in the deepest recession of any major European economy this year. The German government currently forecasts that 2009 gross domestic product will fall only 2.25%. But the deluge of gloomy data from German industry is prompting more analysts to cut expectations, adding fuel to the debate over whether the country should adopt a more aggressive fiscal-stimulus policy.

A tiny default by a Russian aircraft-leasing company is sending ripples through the much larger market for the country's debt, The Wall Street Journal reported. The default by Finance Leasing Co. on $250 million of bonds is the first by a Russian state-owned company on foreign debt since the country's 1998 financial meltdown. That is rattling foreign investors, who worry that Russia could allow many more companies to renege on billions of dollars of debt while it grapples with an economic and financial crisis.

The president of the European Central Bank said Europe doesn't need to boost spending more to combat the global financial crisis, throwing the bank's weight behind Europe's governments in their battle with the U.S. over how to overcome the worst recession in a generation. In an interview with The Wall Street Journal, Jean-Claude Trichet said that instead of pushing new measures, governments around the world should move faster on what they've already announced--referring in part to delays and difficulties in the U.S. government's rescue of its troubled banks. Europe and the U.S.

Hungary’s ruling Socialists began hunting for a new premier to tackle the economic and financial crisis after Ferenc Gyurcsany said he will quit with the nation mired in its worst recession in at least 16 years, Bloomberg reported. His successor, who will need opposition support, would be elected on April 14 by parliament, Gyurcsany, who heads a minority administration, said yesterday. Talks with rival parties are under way. The new Cabinet will have a year to repair Hungary’s finances before the next scheduled elections.

Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions, the Financial Times reported. Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”. “There are three big industries where the US has global leadership: financial services, media and technology.

The current global financial crisis is different from all the others since the end of the second world war, George Soros argued in a Financial Times editorial. Among other measures, both Europe and the US in effect guaranteed that no other important financial institution would be allowed to fail. This necessary step had unintended adverse consequences: many other countries, from eastern Europe to Latin America, Africa and south-east Asia, could not offer similar guarantees. As a result, capital fled from the periphery to the centre.

Carmaker Renault on Friday announced a production boost at one of its French plants but distanced itself from a minister's comments that the move amounted to transfer of foreign auto jobs back to home soil, Reuters reported. As the world's leading carmakers battle to survive the worst sales crisis for decades in an industry now flirting with protectionism, French Industry Minister Luc Chatel characterised the temporary output increase as a first sign that aid measures for the country's auto sector were working.

The launch of an Irish '"bad bank" to quarantine toxic debts of the banks could require loan write-offs which match or are more severe than the banks’ worst-case scenarios under proposals being devised for the Government, Finfacts Ireland reported. Economist Dr Peter Bacon has advised the Irish Government to establish a bad debt company to offload the problem loans off the banks’ balance sheets to free up lending.

Spain's publicly traded banks have weathered the financial storm remarkably well thus far--but that's only half the story. Around 48% of Spain's lending business is in the hands of cajas de ahorro, unlisted savings banks largely controlled by the country's regional governments. Amid the collapse in the Spanish construction sector and an ensuing jump in delinquent loans, many of these are in trouble. The industry body that represents them is calling on the government to take urgent action or face "dramatic consequences." The Spanish government hasn't yet responded.