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Major European Markets Follow Asian Lead, Move Higher


Major European markets opened moderately higher, following the lead of Asian markets that posted solid gains. For VOA, Tom Rivers in London has details.

European markets posted modest increases as investors took some comfort in the global efforts to prop up the international banking system.

Analysts say that as financial institutions grow less wary of lending to each other it will free up credit for consumers to purchase essential things like mortgages and small business loans.

The biggest gainers in European trading were in the financial sector. Deutsche Bank in Germany and Lloyds TSB in Britain are recovering some of the losses incurred during the past few weeks.

Energy stocks are up as well.

But amid this moderate, short-term optimism is the realization that the world economy is slowing.

Here in Britain, the economy shrank by two-tenths of one percent in the last quarter and people like professor Peter Spencer from Ernst and Young's Item Club say for all intents and purposes, Britain is in a recession.

"It is a recession," he said. "But it is relatively shallow and short compared to the bad old days of the 1970s and 1980s, and that is for one simple reason and that is that the Bank of England is in a position to cut interest rates as inflation is coming off its peak."

Spencer says the next year will be financially rocky with growth slowing further and unemployment increasing.

"It will be apparent to everybody, if it is not already, that the good times are over and that belts have to be tightened," he said. "OK, inflation may be coming down a bit, but we will be finding our incomes squeezed in our pay packet. Those people who hold on to their jobs, hopefully the majority of us, will see that their pay really is not increasing."

But as he sees it, by the end of 2009, an economic recovery should be starting here.

The British government's strategy is to borrow its way through these tough times. The latest six-month total of public sector borrowing stands at a level not seen for 60 years.

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