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Bush calls for over $140 bln tax relief to avert recession - extended

President George W. Bush called on Friday for a package of tax cuts and other measures totaling $140 billion to fend off a possible recession. Asian markets dive on skepticism over Bush’s package.

“This growth package must be big enough to make a difference in an economy as large and dynamic as ours, which means it should be about 1% of GDP,” Bush said at a White House announcement. In current terms, 1% of GDP would amount to more than $140 billion. As expected, Bush did not go into specifics. He laid out the principles and called for tax measures to give business an incentive to make major investments this year and direct tax relief for individuals. “This growth package must be temporary and take effect right away so we can get help to our economy when it needs it most,” he said. Bush urged Congress to pass the temporary economic package that could be implemented quickly to “keep our economy growing and create jobs. Passing a new growth package is our most pressing economic priority. When that is done, Congress must turn to the most important economic priority for our country, and that’s making sure the tax relief that is now in place is not taken away,” said Bush. “Our economy has a solid foundation, but ... there are areas of real concern,” Bush said. “My advisers and many outside experts expect that our economy will continue to grow over the coming year, but at a slower rate than we have enjoyed for the past few years. And there is a risk of a downturn,” Bush also conceded in his remarks.

The White House has said Bush and leaders of Congress from both parties held talks on Thursday to see if they can reach common ground on a plan to shore up growth. Under consideration in the talks are ideas like tax rebates, incentives for businesses and extensions of unemployment insurance. Some lawmakers said under Bush’s plan, taxpayers could receive rebates of up to $800 for individuals and $1,600 for married couples. On Thursday, Federal Reserve Chairman Ben Bernanke also backed calls for a fiscal package to stimulate economy, but stressed that such a plan should be quickly implemented and temporary so that it will not complicate longer-term fiscal challenges. “Any program should be explicitly temporary, both to avoid unwanted stimulus beyond the near-term horizon and, importantly, to preclude an increase in the federal government’s structural budget deficit,” he said in testimony to the House Budget Committee. The Fed chief did not embrace any specific provisions or a specific plan but made clear his support for the general concept of an economic rescue package. It is likely that any such package would include tax rebates.

Due to a severe housing slump and a persistent credit crunch, odds of a recession have been increasing. To bolster economic growth, the central bank has cut interest rates for consecutive three times by combined one percentage points and injected a huge amount of money into the banking system. But Bush remained optimistic about the future of the economy, saying it has seen challenging times before, and it is resilient. “In a vibrant economy, markets rise and decline. We cannot change that fundamental dynamic,” he said. “By passing an effective growth package quickly, we can provide a shot in the arm to keep a fundamentally strong economy healthy.” (


Tokyo stocks hit their lowest point in more than two years Monday and Hong Kong stocks saw their biggest one-day percentage fall since 2001 as fears over a looming US recession drove the market down nearly 5.5%. Japanese investors remained skeptical over US President George W Bush’s economic stimulus package and shed a wide variety of issues. The Nikkei 225 Stock Average plunged 535.35 points, or 3.86%, to close at 13,325.94. The broader Topix index of all first-section issues fell 47.76 points, or 3.56%, to 1,293.74.

After Wall Street’s declines last week, Tokyo players expressed skepticism whether Bush’s stimulus package would be enough to pull the world’s largest economy out of recession. Analysts said the stock plunges and instability of the US economy may lead the Bank of Japan’s policy board to leave the key interest rate unchanged at 0.5%. Hong Kong’s Hang Seng Index shed 1,383.01 points to close the day at 23,818.86, 5.49% lower than Monday’s closing figure. Turnover was 117 billion Hong Kong dollars ($14.98 billion). The previous biggest one-day percentage loss on the Hang Seng Index since 2001 came only last Wednesday when the market shed 5.37% as part of a general downward spiral throughout January. Analysts said the Hang Seng Index along with other Asian markets was driven down by negative sentiment over Bush’s economic stimulus package announced in the US over the weekend.

Many people fear the package is inadequate and will do little to stop the slump in the US that an increasing number of experts now believe is inevitable. Elsewhere in China, shares on the key Shanghai Composite Index, which reflects shares traded in both local and foreign currency, closed at 4,911.44, down 5.14%, or 269.07 points. The Shanghai index closed on Monday at its lowest value since December 19, after its biggest daily fall for six months. The smaller Shenzhen Composite Index also fell by 4.62% on Monday.

Banks and real-estate companies again lost heavily, with analysts forecasting more government measures to control investment this month. Shares also fell sharply on the Seoul stock exchange, with the benchmark Kospi index losing 51.16 points, or 3%, to close at 1,683.56. Declining issues outnumbered advancers 620 to 188. The main index of the technology-heavy Kosdaq market fell 14.45 points to 651.87.

India’s benchmark Sensex plunged 10.07% and recorded its biggest loss in several months amid selling pressure fuelled by weak global cues. The 30-share Sensex, which has been recording a bear-run for the last five trading sessions, shed 1,915.26 points to 17,098.44 after mid-session. Similarly, the wider 50-stock S&P CNX Nifty of the National Stock Exchange, fell by 12.19% as it dropped by 695.75 points at 5009.55. Almost all blue-chip stocks were pushed to their lows as metal and realty stocks were hit the most. Australian stocks fell in tandem with Asia, losing 2.9% on similar fears of a recession in the US. The All Ordinaries index gave up 168 points, or 2.9%, to close at 5,630. The Australian market has fallen for 11 consecutive days - the longest losing streak in more than 20 years. It’s down almost 20% for its November high-water mark. Bargain hunters who entered the market in the last hour failed to lift the index. (m&