Europe may be reeling from the worst recession in living memory, but in Italy you can barely tell.

As leaders around the continent suffer the backlash from factory closures and job losses, Prime Minister Silvio Berlusconi is more popular than ever, there is not a hint of social unrest and unemployment remains close to record lows.

It’s not that the euro zone’s third largest economy is flourishing, far from it. But Italy has been the area’s most sluggish performer for well over a decade so Italians are inured to crisis and they can finally enjoy seeing others doing even worse.

“You’ll see that we improve our position in this crisis, even if it’s because others nations are going backwards faster,” Economy Minister Giulio Tremonti told reporters last month.

He may well be right. The European Commission expects Italy’s economy to contract by 2% this year, far less than Britain, Ireland and Germany and broadly in line with the average performance of the euro zone for the first time in years.

Long before a global credit crunch sent the world into recession Italian media pundits were wringing their hands about rising poverty and national decline. Now the same pundits focus on the European and American crisis more than the Italian one.

“Italy is used to a stagnant economy and a society feels the difference of going from zero growth to -2% far less than going from 3% growth to -3 or -4% as is happening in other places,” said Unicredit analyst Marco Valli in Milan.

That may explain why dismal figures on industrial output and gross domestic product have produced negligible popular protests and no appreciable change in the national mood.

Retail sales data shows spending has been stagnant for years. It has recently got even worse but restaurants in the centre and the outskirts of Rome and Milan appear as full as ever.

“For us there has been a crisis since 2001 but not much has changed in the last year,” said Alessandra Fiengo, who sells newspapers, books and toys from her kiosk in Rome.

“There is clearly a mismatch between what the experts tell us and public opinion,” said Paolo Pizzoli of ING bank in Milan.

This is borne out by consumer confidence data from the ISAE think-tank and the European Commission which shows Italians’ morale, although depressed, has fallen far less than the euro zone average.

Italy’s traditionally low-growth but low-risk economic structure is a source of strength in the current crisis.

Italian banks’ more conservative lending practices mean they have suffered less from the crisis than their European peers. Credit card and household debt is a fraction of that in the United States, Britain and Ireland and is also well below that of mainland European economies like Germany and the Netherlands.

“Italian families have relatively high savings and low debt, that is important at a time of crisis because it gives citizens a bit of breathing room,” said union leader Guglielmo Epifani.

Most Italians have no mortgage and live in houses fully paid for at the time of purchase. House prices never boomed as in Britain, Ireland or Spain and show no sign of a similar bust.

Italy’s labor laws have become more flexible over the last decade, but for firms of more than 15 employees they still offer considerable worker protection.

As a result unemployment, which hit a record low of 6.0% in the second quarter of 2007, has edged up only gradually to 6.7%, still unthinkably low compared with rates of above 12% a decade ago.

Berlusconi’s response to the crisis has been to express constant optimism and generally act as if it didn’t exist.

The government was widely criticized by economists for producing stimulus packages a fraction of the size of those of other large countries, and yet the prime minister’s minimalist approach appears to be bearing fruit politically.

He remains far ahead in opinion polls and after a handsome government victory this week in a closely watched regional vote on the island of Sardinia, opposition leader Walter Veltroni resigned, leaving Berlusconi looking even stronger.

Analysts say it is only a matter of time before the output slump takes a bigger toll on jobs, yet the same economists point out Italian employment levels are traditionally stickier than elsewhere in Europe and correlate less closely to GDP changes.

For Italy, the most frightening aspect of the current crisis is what happens when it ends, said a top Treasury official who asked not to be named.

“The crisis will be less acute here and you won’t see social unrest, but our structural weaknesses are all still there and when the other countries recover we will recover less. Then we will go back to being the sick man of Europe.”

U.S. crude for March delivery rose 32 cents to $35.25 a barrel.

“The crude market is still hanging on to the low end of its range,” said Tom Bentz, an analyst at BNP Paribas Commodity Futures Inc. in New York.

“The market is waiting for inventory reports over the next couple of days and positioning ahead of Friday’s March crude expiration,” Bentz said.

With the March contract due to expire on Friday, the April contract’s premium narrowed to around $3.60 on Wednesday versus nearly $8 last week, a sign traders believe swollen inventories in Cushing, Okla., may persist.

Traders said Brent crude futures in 2009 are trading within a $40-$50 a barrel range because OPEC supply cuts have helped support the price in spite of slackening demand.

“Certainly it’s continuing gloom for demand, but OPEC’s reining in its cut is holding Brent in a sideways range,” said Christopher Bellew, broker at Bache Commodities in London.

The Organization of the Petroleum Exporting Countries, a supplier of more than a third of the world’s oil, has struggled to corral its member states into cutting up to 4.2 million bpd since September to prop up prices.

Earlier this month the producer group said its members had delayed 35 new projects due to low prices and the slowdown in demand, and some OPEC countries have raised the prospect of another supply cut at their next meeting in Vienna on March 15.

The U.S. Energy Information Administration will release its weekly inventory data report on Thursday, but a Reuters poll of analysts on Tuesday showed an average forecast for an increase of 2.6 million barrels, nearing an 11-year high.

U.S. automakers unveiled new survival plans seeking billions of dollars in extra government funds on Tuesday, drawing skeptical responses and investor doubts about a return to profitability.

Analysts said the bailout request and Obama administration plans to help homeowners would weigh on crude on Wednesday.

“We look for increased volatility in all markets during Wednesday’s session … of the two, the focus will be more on Detroit,” Edward Meir of MF Global wrote in a note.

The news across Asia has been almost uniformly bad, with Japan, the world’s second-largest economy, reeling from its worst downturn in a generation. The Nikkei stock average fell 1.5% to its lowest close in nearly four months.

The financial crisis has left much of the world in recession and hammered oil consumption, pulling crude prices from record highs above $147 a barrel hit in July.

Traders will also watch for data on U.S. housing starts and January industrial production, as well as the Redbook retail sales index for February to look for new indications on the health of the world’s top economy

The two firms, in documents submitted to the Treasury Department, also detailed plans to cut 50,000 jobs worldwide by the end of the year. GM said it plans to close five more plants in the next few years and confirmed it will drop some of its weaker  brands.

When all is said and done,GM  said that by 2011 it could need a total of $30 billion, which includes the $13.4 billion in Treasury loans it has already received. In the near term, GM will most certainly need $9.1 billion in additional loans and could require another $7.5 billion in the next two years if auto sales don’t improve.

Chrysler said it now needs a total of $9 billion, up from the $4 billion Treasury loan it received in December. Chrysler said it will need that money by March 31.

GM also accelerated its job cut plans, saying that it would eliminate 47,000 jobs over the course of 2009. The company said it would cut about 20,000 jobs in the United States, or about 22% of its remaining U.S. staff.

Previously, GM called for U.S. job cuts of between 20,000 to 30,000 workers, but it had stretched out those reductions through 2012.

The company said it plans to close five additional U.S. plants by 2012 –in addition to the 12 planned closings announced in December. Executives would not identify the plants that would be closed.

“Our plan is significantly more aggressive because it has to be,” said GM Chairman Rick Wagoner.

Experts said that the request for additional dollars are not a surprise, given how bad auto sales have been since the December plea for help.

“The most important issue is not what the automakers are going to do to cut costs, but rather what the government is going to do to stimulate car sales,” stated Jeremy Anwyl, CEO of car sales tracker Edmunds.com. “No automaker is viable under the current market conditions, and so far the spending package appears to spread money too thin to actually make much of a difference in any one area.”

Some economists argued that the problems detailed in the plans show that GM and Chrysler are already failed companies.

“When consumers refuse to buy your product, that’s the economy telling you you’re bankrupt,” said Rich Yamarone, director of research at Argus Research. ”

But Yamarone said it may make sense to give them the money they need, even if it’s good money after bad, because the battered U.S. economy can’t weather the halt of operations at GM and Chrysler right now.

GM added it plans to phase out the Saturn brand by the middle of 2011 if it is unable to sell or spin-off the brand. GM is also looking to sell its Saab brand, and will look for help from the Swedish government to support Saab until a buyer is found.

Chrysler said it plans to cut about 3,000 jobs, or 6% of its workforce, and reduce capacity by another 100,000 vehicles this year as it tries to adjust to reduced demand. It also said it has won the concessions from the United Auto Workers union and its creditors that were demanded under terms of the loan from the Treasury Department.

The companies had a deadline of Tuesday to update the government on the status of their turnaround plans. The new plans highlighted a worsening forecast for sales, and more job cuts at the companies in the coming months.

A newly-appointed auto panel will review both plans and determine by March 31 if GM and Chrysler can be viable in the long run. Specifically, the Treasury Department is looking for details about the progress of negotiations with creditors and the UAW.

White House spokesman Robert Gibbs issued a statement late Tuesday saying that the panel would be reviewing the plans and that “We appreciate the effort that these companies and their stakeholders have made.”

The automakers’ request for a $34 billion federal bailout in December fell short when Senate Republicans blocked passage of the request. The Democratic majorities in both houses of Congress have grown since then.

While both plans are more than 100 pages each, they have only limited details about the latest deals reached with the United Auto Workers union to shed costs, as well as about GM’s efforts to shed much of its unsecured debt, as required under the terms of its existing loans.

GM is struggling under a $35 billion mountain of unsecured debt. It hopes to shed about two-thirds of that debt with a swap of debt for equity with its bond holders.

But the company was not able to reach a deal with the bond holders by Tuesday’s deadline, although it did include a letter from their committee’s financial and legal advisers saying that they are “prepared to recommend that the committee approve and support the bond exchange” proposed by GM.

If the federal panel looking at the plans rules either company is not viable, it could recall the outstanding loans, a move that would likely force them into bankruptcy. In a statement, Chrysler chairman Robert Nardelli said he believes additional federal help is the best course for both Chrysler and the battered U.S. economy.

“We believe the requested working capital loan is the least-costly alternative and will help provide an important stimulus to the U.S. economy and deliver positive results for American taxpayers,” said Nardelli in the statement.

To that end, the companies also submitted an analysis of what would happen if it filed for bankruptcy. In a reorganization scenario, GM said it might need up to $100 billion in additional federal loans to finance their operations during a two-year reorganization. Chrysler said it would need up to $20 billion to $25 billion.

If it was forced to liquidate, Chrysler estimated there would be a loss of 2 million to 3 million jobs, resulting in a $150 billion reduction in federal tax revenue over three years.

Nardelli added that a Chrysler bankruptcy would have a “cataclysmic” impact on the auto parts supplier industry, which would affect operations and production at all automakers.

The other member of Detroit’s so-called Big Three, Ford Motor, requested a credit line of $9 billion from Congress in December.

But Ford said it would not to have to tap the line of credit unless conditions in the auto market and economy deteriorated more than expected.

Since then, demand for cars and trucks has gone from bad to worse, with January sales falling to their lowest level in 26 years. The automakers and industry experts have also slashed sales forecasts for 2009 and beyond.

Chrysler has been among the hardest hit in the industry though. Sales plunged 54% from year-earlier levels in December and January, and the company left most of its 12 North American assembly plants idled throughout January due to weak demand and excess inventory.

In addition to the job and production cuts, the company pledged to further lower costs by eliminating a manufacturing shift and discontinuing three models.

“We fully understand the need to adapt to significantly reduced annual U.S. sales,” said Nardelli in Chrysler’s statement.

The company now expects industrywide U.S. sales this year of only 10.1 million vehicles, which would be a 40-year low. It believes sales from 2010 through 2012 will average only 10.8 million a year.

GM’s U.S. sales forecast for 2009 is close to Chrysler’s estimate – around 10.5 million cars and light trucks. But it is far more optimistic about a rebound in sales from 2010-2012.

Separately, UAW president Ron Gettelfinger said in a statement Tuesday that the union had “reached tentative understandings with Chrysler, Ford and General Motors on modifications to the 2007 national agreements.”

Gettelfinger said “the changes will help these companies face the extraordinarily difficult economic climate in which they operate.” But he declined to disclose specific terms of the tentative agreement and said that discussions were continuing

Of course, we’ve been through this before. The price of oil shoots up; we start using less; reduced demand sends the price down; we start using more; pretty soon it’s shooting up again. This time, though, it does feel different. It seems as if Americans have made a real and fundamental commitment to consuming less energy. That is not so much out of idealism as it is the good side, for a change, of our short attention span. When the price of gasoline shot past $4 per gal., it was both shocking and reassuring. Economists had long wondered what price it would take to get our attention. This, at last, was it. Yet $4 gas turned out not to be the end of the world. Although it was devastating for some people–and it surely accelerated our plunge into recession, which is affecting all of us–we adjusted more easily than one would have thought possible. And we kept on adjusting, even as the price of oil plummeted.

Will this change in behavior last? Or will we return to our wastrel ways as we climb out of recession and the reality again sinks in that gas is cheap? The one sure way to prevent this second scenario from happening is not to let gas get cheap again. Yes, this is yet another plea for that hoary notion: a big energy tax. Just five months ago, we were essentially paying a tax of $95 per bbl. That’s the difference between what oil cost then and what it costs now. This was a “tax” whereby the revenue went into the pockets of oil producers–about two-thirds of them foreign countries and one-third fellow Americans. Isn’t there something better to do with the money?
This idea always comes up and never goes anywhere. That’s partly because of our general loathing of taxes and suspicion of Washington and partly because the idea tends to come up when energy prices are rising and people find it hard to believe that it would be good if they rose even more. But a couple of things are different now. First, we have experienced the high energy prices  that people in most of the rest of the world already live with, and we know we can live with them too. Four-dollar gasoline is no longer unthinkable.

Second, this is the perfect moment for the other part of many proposals for an energy tax, which is to give the money back to people by lowering the payroll tax. The payroll tax, or FICA, collects about 15% of your wages or salary–half from you and half from your employer. It is expected to bring in close to a trillion dollars in 2009. Using our windfall from plummeting crude-oil prices alone, we could cut the FICA tax by more than half. Including other forms of energy would bring in even more.

FICA is, in effect, a tax on job creation. It applies to the very first dollar earned by a minimum-wage worker, but most of it tops out at an annual income of about $100,000 and doesn’t apply at all to income from investments. For most Americans holding jobs, FICA now takes a bigger chunk of their income than the income tax itself. And yet it rarely enjoys the tender concern of tax-cutting Republicans, who prefer to concentrate on tax breaks for capital gains. Cutting the FICA tax in half, for workers and for employers, would make it more affordable for employers to hire–or avoid layoffs–while giving everyone who makes less than $100,000 a 7.5% raise to spend and stimulate the economy even further. People making more than $100,000 would get a tax cut too–as big as anyone else’s, though a smaller percentage of their incomes.

The White House said a disorderly bankruptcy in the motor industry would be a huge blow which the US economy could not withstand.

Meanwhile General Motors said it was temporarily stopping some production.

And Honda is also to cut back output in North America.

GM, which has been pleading for an emergency government loan to avert collapse, said it would halt 30% of its North American production “in response to rapidly deteriorating market conditions”.

It saw vehicle sales fall 41% in November, when overall US car sales fell 26% industry wide.

The temporary shutdowns will affect 14 US factories as well as three in Canada and three in Mexico, reducing output by 250,000 vehicles in the first three months of 2009.

“The speed and severity of the US auto market’s decline has been unprecedented in recent weeks as consumers reel from the collapse of the financial markets and the resulting lack of credit for vehicle financing,” it added.

Earlier this year, the US approved a $700bn  bail-out for the finance industry, known as the TARP programme.

It had previously been reluctant to use this money for other industries but White House spokeswoman Dana Perino said it would consider other options, including the use of the TARP program, to prevent a collapse of troubled automakers.

She added that it would be “irresponsible” to further damage the economy by allowing the Detroit car companies to fail.

“The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry,” she added.

President-elect Barack Obama said he was disappointed that the Senate failed to act, adding that “millions of jobs rely directly or indirectly on a viable auto industry”.

The failure of the bail-out raises the prospect of huge job losses.

The Senate majority leader, Harry Reid, said he was “terribly disappointed” when it became clear the vote had collapsed, calling it “a loss for the country”.

“Millions of Americans, not only the auto workers but people who sell cars, car dealerships, people who work on cars are going to be directly impacted and affected.”

The deal would have given the Big Three carmakers access to emergency funding to help them cope with the sharp downturn in sales because of the global financial crisis.

General Motors and Chrysler have said they risk ruin without immediate aid. Ford says it may need funds in the future.

The bosses of the three firms had previously asked for $34bn from Congress.

They have all seen sales fall sharply this year in the US, partly reflecting an industry-wide fall, and partly because their large gas-guzzling vehicles are no longer what customers want.

The price of oil reported in the news is actually the price of oil in the futures market. In this market, traders do not exchange physical barrels of oil, but instead trade contracts which obligate them to exchange oil at a quoted price at a specific date in the future, usually months in advance. Such a contract allows companies to hedge positions by locking in prices early. Airlines might buy futures contracts to reduce their exposure to rising fuel prices. Conversely, oil companies might sell futures contracts to assure a profit against future price drops. It’s all about reducing risk and uncertainty. But what if oil suppliers were instead buying oil futures, compounding their own risk and reaping enormous profits from the explosion in the price of physical oil?

The futures market has become the public driving force in pricing oil. But the vast majority of oil consumed in the world is purchased through private deals, given the massive undertaking of physically delivering millions of barrels. However, a series of private deals cannot establish a market price. Because pricing in the futures market is transparent, in that trade activity is publicly available, it establishes the widely accepted benchmark for the price of oil. In other words, the futures market serves as the price discovery mechanism for the oil the world consumes.

But the deal to rescue the faltering U.S. financial system stalled on Thursday amid bickering between Democrats and Republicans.

NYMEX crude for November delivery fell $1.32, or 1.2 percent, to $106.70 a barrel by 0156 GMT, after rising $2.29 to settle at $108.02 on Thursday.

London Brent crude fell $1.13 or 1.1 percent to $103.47.

Oil has gained about 11 percent so far this year on geopolitical tensions between Iranand the West, supply disruptions in Nigeria and a falling U.S. dollar, but it is still 27 percent below the record price of over $147 hit in mid-July.

“Oil is down because traders are taking profits,” said Ryuichi Sato, an analyst at Mizuho Corporate Bank in Tokyo.

“The delay in the bailout plan is bearish for crude markets. There is no confidence in the U.S. economy and traders are worries about the energy demand outlook.”

Concerns about the weakening U.S. economy and increasing evidence of slowing fuel demand have pushed crude prices down from their record high.

A rescue for the U.S. financial system appeared in chaos on Thursday amid accusations Republican presidential candidate John McCain had scuppered the deal.

News that Washington Mutual was closed by U.S. authorities and its assets sold in America’s biggest-ever bank failure also rattled the financial markets.

Separately, Shell Oil said on Thursday its Mars and several other Gulf of Mexico oilfields were expected to return online by the end of next week.

Although, nearly 60 percent of the crude oil production from the Gulf of Mexicoremained shut because of the impact of hurricanes Gustav and Ike, the International Energy Agency said on Thursday it sees no need to release emergency supplies.

“We don’t have to mobilize,” IEA Executive Director Nobuo Tanaka said. “The market is now taking care of the current situation.

The average price of unleaded regular dropped 1.3 cents to $3.726 a gallon, from $3.739 a gallon, according to the survey released Tuesday by motorist group AAA. While prices have now dropped some 13 cents and have stayed below the key $4 level for some time now.

But prices still remain much higher from a year ago, when gas was selling for less than $3 a gallon. Current prices are still about 33% higher from a year earlier at this time. Drivers can take some comfort in the fact that prices are 38.8 cents, or 9.4%, down from the record high price of $4.114 a gallon set on July 17.

Gas prices had been moving higher following the devastation left behind by hurricanes Ike and Gustav. With hurricane season is more than halfway done and the high summer driving season is over, the downward trend for gas prices may continue unless a major storm, once again, disrupts the flow of crude.

Oil prices had been moving lower since mid-July amid weakening demand, losing more than a third of its value since it reached a record of near $150 just two months ago.But crude prices rallied back Monday, posting the biggest one-day dollare gain ever as the dollar slumped on the government’s bailout plan and traders rushed to fill obligations as the October contract expired.

Crude for November deliver – the new front-month contrac – was sharply lower Tuesday, down $2.07 to $107.32 a barre. Meanwhile, only two states continue to report gas prices above $4 a gallon: Alaska and Georgia. Alaska continues to be the state with the most expensive gas prices, at $4.319 a gallon.

The cheapest gas can still be found in New Jersey, where gas cost $3.447 a gallon, according to AAA’s Web site

“We must act now to protect our nation’s economic health from serious risk,” Bush said at a White House press conference. “There will be ample opportunity to discuss the origins of this problems. Now is the time to solve it.”

“This is no time for partisanship,” Bush added. “We need to move urgently needed legislation as quickly as possible without adding controversial provisions that could delay action.”

Earlier, Paulson said that federal action would target the mortgage-related “illiquid assets” that are burdening the finance industry.

“The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy,” said Paulson. “This troubled asset relief program must be properly designed and sufficiently large to have maximum impact.”

The new program would cost hundreds of billions of dollars, according to Paulson.

“This  has got to be big enough to make a real difference,” he said.

The plan will be fleshed out in the coming days in meetings between Paulson, other Bush administration officials and lawmakers.

“I will spend the weekend working with members of Congress of both parties to examine approaches to alleviate the pressure of these bad loans on our system, so credit can flow once again to American consumers and companies,” Paulson said.

The mortgage plan is part of an extraordinary effort by the federal government to contain a financial crisis that has rocked Wall Street and has started rippling out to Main Street.

In the past week, two of the nation’s most venerable investment banks – Lehman Brothers and Merrill Lynch (MER, Fortune 500) – have fallen and the Federal Reserve was forced to lend $85 billion to prevent the sudden collapse of insurance giant American International Group .

Meanwhile, mainstay financial institutions are scrambling to raise cash or find merger partners as lending has frozen up and investor confidence has sunk.

In addition to the plan aimed at housing, the government on Friday announced a number of steps aimed more directly at investors and the stock markets.

The Treasury Department said it would insure money market mutual funds for finance firms that pay a fee to participate in a temporary program.

Bush said that “recent stresses cause some to question whether” money market deposits are safe. He said the plan will include government insurance for money markets.

“For every dollar invested in an insured fund, you’ll be able to take a dollar out,” Bush said.

Separately, the Securities and Exchange Commission took what it called “emergency action” and temporarily banned investors from short-selling 799 financial companies.

“What we had, in effect, was a dam that was sprouting lots of cracks and lots of leaks,” said Bernard Baumohl, chief global economist for The Economic Outlook Group. “For the last several days, the Federal Reserve and the Treasury were trying to plug each of these holes as they were appearing. What they decided to do today was to put up a whole new dam.”

This is the federal government’s most far-reaching intervention in the financial markets since the Great Depression of the 1930s.

“They did what they had to do,” said Baumohl. “They were facing a Category 5 financial hurricane that really threatened the entire global financial architecture.”

The downside to the plan is its enormous cost, said Baumohl, estimating that the federal bail-out of the financial markets could swell the national deficit to $1 trillion annually.

While the Federal Reserve had been tipped to leave rates on hold, analysts said a cut looked more likely after Lehman Brothers filed for bankruptcy.

The Fed has sought to soothe nerves and earlier injected $70bn  into markets to boost liquidity.

Central banks worldwide have faced the twin threat of quickening inflation and a wider economic slowdown.

“The downside risks to growth and the upside risks to inflation are both of significant concern to the committee,” the bank’s officials said.

Michael Wallace, an analyst at Action Economics said: “The Fed’s statement largely resisted market pressure for a more substantial capitulation.”

He said the assessment was “defiantly set at neutral”, in expressing worries about both slowing economic growth and inflation.

The decision to leave rates at 2%, as it has been since April, was a unanimous move.

US shares were volatile with the leading Dow Jones Industrial Average down 106 points to 10,811 after the news.

However, it later ended more than 140 points higher at 11,059.02 as investors interpreted the Fed’s decision as a sign that the economy was less fragile than some had feared.

Another factor boosting the market were reports that insurance giant AIG might be able to access a loan from the Federal Reserve, which would prevent the firm from collapsing.

Investment firm Lehman Brothers filed for bankruptcy on Monday, triggering market jitters and prompting a sharp fall in shares worldwide.

Fears have been raised that AIG could be the next firm to fold.

Serious risk

In light of such turmoil, certain traders had hoped the central bank would cut rates in a bid to boost the economy and warned that the Fed’s latest move could be seen negatively.

Ian Shepherdson, lead US economist at High Frequency Economics said: “Not to acknowledge the catastrophes of the next few days runs the very serious risk that the Fed will be seen as Nero, fiddling while Wall Street burns.”

While the Federal Reserve kept interest rates unchanged on Tuesday, it noted that stresses on financial markets had grown sharply and added that it would take further action if needed.

The central bank said “strains in financial markets have increased significantly and labour markets have weakened further”.