President-elect Barack Obama's team worked Friday to widen a massive spending package to jolt the United States out of recession as the global downturn did further heavy damage to European industry.
New signs emerged of the dire state of the world economy with South Korea's Ssangyong Motor applying for bankruptcy protection, China pledging more than 25 billion dollars for its aviation sector and industrial output falling sharply in Britain, Spain, France, Germany and Sweden.
Obama, who takes office on January 20, has drafted a stimulus plan expected to reach some 775 billion dollars or more, warning that if this were not implemented the recession and double-digit employment could linger for years.
"I don't believe it's too late to change course. But it will be if we don't take dramatic action as soon as possible," Obama said Thursday. "If nothing is done, this recession could linger for years.
But the plans got a frosty reception from some members of Obama's own Democratic Party. Senate Budget Committee chairman Kent Conrad questioned giving individual taxpayers and couples a rebate of 500 to 1,000 dollars in a bid to prop up consumer spending.
"These marginal incentives are of marginal effectiveness," Conrad said. "When people are afraid they are going to lose their jobs, if they get another 20 dollars a week they don't spend it, they save it."
Obama's economic team was scrambling to overhaul the financial rescue package for Wall Street and broaden it to include municipalities, small businesses and homeowners, The Washington Post reported Friday.
The administration of outgoing President George W. Bush has already used half of the money but members of Congress were said to be deeply sceptical over whether it was working and reluctant to approve further spending.
Congress approved the intervention last year after Wall Street went into freefall, dragged down by a shortage of liquidity which serves as the economy's lifeblood.
Europe meanwhile was hit with another wave of worrisome economic data.
British manufacturing output sank by the fastest pace in 27 years during November, tumbling by 2.9 percent from October and down 7.4 percent on a 12-month basis to record the biggest annual drop since 1981, the Office for National Statistics said.
"The latest news on the UK's manufacturing sector is simply awful," said Capital Economics analyst Paul Dales.
Spanish industrial output plummeted 15.1 percent in November on a 12-month basis, the biggest drop for at least 15 years while in Germany it fell by a much-worse-than-expected 3.1 percent compared with October.
Swedish industrial production weakened by 2.2 percent while in France it fell 2.4 percent in November from October, when it had declined 3.7 percent.
Europe's main stock markets on Friday extended recent losses as traders reacted to the negative news while awaiting key US jobs data, which was expected to show the results of widespread layoffs.
The auto industry has been affected particularly severely around the world. Hit by falling car sales, Ssangyong Motor of South Korea said Friday it had applied for court receivership to avoid bankruptcy.
The company's Chinese parent, Shanghai Automotive Industry Corporation, made the decision after being turned down for new loans by the state-run Korea Development Bank, which pressed the company to put up more funding.
South Korea's central bank meanwhile cut its key interest rate by 0.5 percentage points to 2.5 percent, as President Lee Myung-Bak called for more public spending to overcome what he called an "unprecedented" economic crisis.
It followed the Bank of England, which on Thursday cut Britain's key rate to an all-time low of 1.5 percent.
China, meanwhile, took the latest measure to help its beleaguered aviation sector as its top airline reported the first passenger decline in years.
The China Aviation Industry Corporation, the main state-owned aircraft maker, secured a pledge of up to 176 billion yuan (25.7 billion dollars) in domestic bank loans, state media said.
