US auto rescue wins backing, but economic gloom deepens

Al l*, Washington

IIS legislators approved a massive government lifeline for the ailing auto industry as fresh economic data on Thursday offered evidence of a deep and painful global recession.

fhe House of Representatives raised hopes on Wednesday by approving a pat kage worth I I billion dol lai s to keep the three biggest auto makers afloat poten tially the most far-reaching intervention in US industry in years.

House Speaker Nancy Pelosi said (he legislation help ing the BigThree automakers -- l ord, General Motors and Chrysler would serve as "a jumpstart for an industry and our country's economic health".

But the legislation now faces stiff opposition in the Senate from Republicans who consider it a quick fix.

Republican Congressman Torn Feeney described the bailout as a "short term solution" and telling the House: "Micro-managing a business from Washington is the supreme act of hubris. It will never work."

T he world economic crisis meanwhile showed signs of deepening, with a flood of woeful data on Thursday painting an increasingly gloomy picture in Asia.

The Asian Development Bank said growth in Asia's developing economies will slow to 5.8 percent in 2009, from a previous estimate of 7.2 percent, and that regional governments must boost domestic demand to counter a deeper slowdown.

Europe wrangles over stimulus as gloom gathers

AFP, Brussels

European nations wrangled over the best way to beat the global recession on Thursday as a key US auto industry bailout package faced a tough vote in the Senate.

Tensions over attempts to stimulate the European econony broke into the open as EU leaders met for a summit in Brussels.

British Prime Minister Gordon Brown has adopted "crass Keynesianism" by borrowing money to finance state spending, German Finance Minister Peer Steinbruck told Newsweek magazine.

The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," Steinbruck said.

Germany has faced intense pressure from Brown, French President Nicolas Sarkozy and European Commission chief Jose Manuel Barroso to boost domestic consumption, but has refused to indulge in borrowing and deficit spending.

Brown dismissed the criticism and said the comments were "internal German politics."

In the United States, the House of Representatives approved a 14-billion-dollar government lifeline for the ’ US auto industry, but the proposal faced possible defeat | in the Senate amid stiff Republican opposition.

AIG faces tough selling climate to pay back US govt loan: CEO

AFP, Hong Kong

The head of troubled insurance behemoth AIG said Thursday that tough economic conditions would make it difficult to sell off assets in order to pay back a giant US government loan.

However, Edward Liddy, chairman and chief executive officer of the US firm, said it was determined to push through with its disposal of non-core assets, as it grappled to pay back part of the 150 billion dollar rescue package.

These are challenging times to undertake divestitures and it's quite possible that the pace or order of our divestitures will change," he said in Hong Kong, in a speech to the American Chamber of Commerce.

"Nevertheless, I have made the very public commitment that we will pay down the entirety of the amounts we have borrowed from the US taxpayers."

Liddy said the firm, whose full name is American International Group, had used around 30 billion dollars of a 60 million dollar loan facility, put together to rescue what was previously the world's biggest insurance firm.

Sumitomo Mitsui to raise $5.8b

AFP, Tokyo

Japan's third largest bank, Sumitomo Mitsui Financial Group, said Thursday that it would raise 5.8 billion dollars from investors to shore up its finances during the economic crisis.

Sumitomo Mitsui said it would sell preferred securities worth 538.2 billion yen to domestic institutional investors.

The securities, which will be issued through a special purpose company in the Cayman Islands next week, will not be convertible into common stock.

Separately Japan's top broker Nomura Holdings said it would raise 300 billion yen by selling bonds.

The move aims to top up Nomura's operating funds in the Asia-Pacific and Europe following its acquisition of parts of failed Wall Street giant Lehman Brothers.

Japanese financial giants have been relatively resilient to the global credit crunch that has pushed banks worldwide to the brink of bankruptcy, but they are now being squeezed by weak markets and a Japanese recession.