US President-elect Barack Obama said on Saturday he was crafting a two-year plan to fight an economic crisis of "historic proportions" and Chinese leader Hu Jintao said his country was ready to play a big role in the global effort. In another sober assessment, billionaire investor George Soros said the US economy needed an additional $300 billion to $600 billion in support funds to help it withstand a financial crisis which he said "has exceeded my most daring expectations".
The corporate scenario also darkened, with US automaker General Motors Corp considering "all options", including bankruptcy, because of its liquidity problems, according to the Wall Street Journal. And banker Citigroup Inc began talks with the US government amid doubts about its ability to survive. "There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better," said Obama, who takes over from US President George W. Bush on January 20.
He was speaking in a radio address one day after US stock markets rallied on word that he had chosen the New York Federal Reserve president, Timothy Geithner, as Treasury secretary. Obama gave a bleak view of the situation, saying swift and bold action was needed to prevent a deep slump, a spiral of falling prices, and millions of job losses.
He signalled he was prepared to push for a much larger package than the $175 billion stimulus measure he called for in his election campaign. His plan would set a goal of creating 2.5 million more jobs by January 2011 - a two-year scenario. "The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions," Obama said.
CHINA TO THE RESCUE?Chinese President Hu, speaking in Lima, Peru, said the Asian powerhouse would work alongside the international community to strengthen co-operation and protect international markets. China has been a major driver of the world economy as its rapid expansion fuelled demand for raw materials. But with so many troubled countries looking to China to ease their financial woes, Beijing has until now been wary of taking a leading role.
"China is within the scope of its abilities taking major efforts to address the financial crisis," Hu said in a speech to business leaders. This included providing support for liquidity for domestic financial institutions and co-ordinating macroeconomic policy with other countries. Hu is in Lima for a summit of leaders from Asia and the Americas within the Asia-Pacific Economic Co-operation (Apec) forum, whose countries represent more than half of global output.
They are expected to ratify previous commitments by the Group of 20 powerful world economies to use trade and government spending to combat the economic crisis. The leaders of Japan, Indonesia, Australia, Canada, Mexico and Russia and other countries will join Hu and US President Bush at the weekend summit. Soros, one of the world's first and best-known hedge fund managers, told Germany's Der Spiegel magazine the United States needed an infrastructure programme and a large economic stimulus package to provide its cities and states with sufficient cash.
The US government has launched a $700-billion financial bailout initiative in response to the turmoil. But the US economy needed additional support measures of between $300 billion and $600 billion, Soros said. He criticised US Treasury Secretary Henry Paulson for having reacted too late to the crisis but said he had high hopes about Obama's ability to manage the situation. "The duration of the crisis depends on the success of his policies," Soros said, according to Der Spiegel.
SCARY MOVIES: In Germany, Chancellor Angela Merkel said she expected the first few months of next year to bear more bad news for Europe's largest economy, which is now in recession. Merkel told Welt am Sonntag newspaper that economic development in Germany, Europe and the rest of the world was hard to predict but "we have to expect the coming year, at least in the first months, to be a year of bad news."
The Wall Street Journal said General Motors was considering "all options" because of its liquidity problems. A GM spokesman told the paper that management was doing everything it could to avoid a bankruptcy filing. Chief executive Rick Wagoner, along with bosses from Ford Motor Co and Chrysler this week went to Capitol Hill to plea for $25 billion in aid to bail out the auto industry.
Citigroup executives, meanwhile, met Federal Reserve and US Treasury Department officials in recent days to discuss its options, which include another capital injection from the Treasury, a person familiar with the matter said. The bank's management has also discussed selling off units or finding another bank to merge with. "It's fear and panic at this point," said Gerard Cassidy, a banking analyst at RBC Capital Markets in Portland, Maine. "Investors have seen similar movies this year, and the endings are very unpleasant."