The global bailout scorecard
23rd Nov 08, 8:55pm
Around the world, many governments have made major emergency commitments to shore up their banking systems, and to re-invigorate their economies. The threat seems very real, and the amounts of money committed to fighting the threat are enormous - approaching NZ$5 trillion, or more than 30 ( 30,000 ) times the size of the New Zealand economy. So, who is spending what? We have a list. True it's an approximate list, based on reports in a number of publications. We've ordered them by the level of support as a percentage of GDP. As at the end of October, it goes something like this... 1. Britain tops the list with a bailout plan equivalent to 21% of their GDP. It includes tax cuts, funds to re-capitalise their banks, and wholesale funds to unfreeze illiquid securities. 2. China is committing 16% of its GDP to a two year program of rural infrastructure, roading, railway and airport development, and substantial amounts of social service. 3. Switzerland is taking over enormous amounts of its bank's toxic securities, as well as spending new amounts in a public works program. All up, it will commit 15% of its GDP. 4. Russia's program will cost it 12% of GDP with all this focussed on supporting its banks and stock market. 5. South Korea is putting most of its 9% of GDP into helping its banks retain their foreign-currency liquidity. 6. Spain is also using most of its 8% of GDP program to support its banks. 7. Germany is fronting up with 7% of GDP for its diversified program. 8. The USA has the biggest overall program, but then, it is by far the biggest economy - almost three times as large as the second biggest (Japan). But its committments 'only' amount to about 6% of its GDP. 9. India has made commitments to its banking system of about NZ$75 billion, or some 5% of its GDP. 10. France is doing some bank re-capitalisation, plus a huge guarantee for interbank transactions. These add up to about 2% of GDP 11. Japan is committing 1% of its GDP to a stimulus package - but this is a regular feature of Japanese government responses to their economic challenges since their 1990 real estate bust. Lets hope the rest of the world does not get caught up in a similar long-term trap.