The paper is particularly valuable in content by addressing the whole spectrum of issues faced by the world states in 2009, because of the financial crisis. The paper will present the risks taken by the world states in 2009. Then it will present several measures to combat the financial crisis worldwide.financial crisis, global government, economic growth, global crisis, jobs.

Gabriel Cristian BAJENARU

English

Research Papers in Economics

 
Review of General Management                                                Volume 11, Issue 1, Year 2010  79 
 
 
FINANCIAL CRISIS IMPACT ON WORLD STATES IN 2009 
 
Gabriel Cristian BĂJENARU 
“Spiru Haret” University, Romania 
Faculty of Management, Brasov 
cristi762002@yahoo.com 
 
 
  
 
 
 
 
Keywords: financial crisis, global government, economic growth, global crisis, jobs. 
 
JEL Classification: G01, O11. 
 
1. Major risks of the world economy in 2009 
 
The  year  2009  will  be  extremely  restless  from  the  global  economy  point  of  view, 
according to a survey released by the World Economic Forum (WEF), which launches an 
advertisement on promoting, by a series of states, some short-term investment policies, on a 
background  of  panic,  without  taking  into  consideration  their  consequences.  Economic 
forecasts for 2009 are sinister for the most economies says the Forum of Davos, in the annual 
report on global risks.  
The World Economic Forum's Annual Meeting in Davos brought together the leaders of 
the most powerful countries. The main topic was the economic crisis and its effects on the 
world’s economy. Also, the International Labour Office (ILO) announced that over 50 million 
people all over the world would join the ranks of the unemployed this year. 
The present crisis has deleted 40% of the world's wealth and has evaporated a huge 
amount of money in the last four quarters, and the future looks even more dismal, with no 
signs  of  returning,  Stephen  Schwarzman,  Chairman  and  Chief  Executive  Officer  of  the 
Blackstone Group, warned at Davos. 
IMF expects a slow rate of growth of the world economy from 6.25% in 2008 to 3.25% 
in 2009. One of the main reasons is the decrease of demand on international markets.  
Abstract 
The paper is particularly valuable in content by addressing the whole spectrum of issues faced 
by the world states in 2009, because of the financial crisis. The paper will present the risks taken by 
the  world  states  in  2009.  Then  it  will  present  several  measures  to  combat  the  financial  crisis 
worldwide.   
Volume 11, Issue 1, Year 2010                                                        Review of General Management  80 
Deterioration  of  fiscal  deficits,  lowering  the  value  of  assets  globally,  the  potential 
moderation of China's economic growth and increased unemployment are the risks that will 
be faced by the world economies in 2009, following the global crisis, is shown in the report 
submitted by Marsh.  
"In 2009, markets remain volatile, liquidity remains low, unemployment is rising and 
consumer’s  confidence  in  business  dropped  to  the  lowest  levels,"  stated  the  report  on 
economic global risks this year, submitted by the World Economic Forum and the insurance 
brokerage and risk consultancy Marsh. 
The report highlights that the financial crisis is reflected in all economic sectors, and 
actions to counter the crisis may bring long-term effects on the financial sector, which may 
relate to over regulation and lack of resources to prevent other risks, such as those related to 
the lack of investment in infrastructure.  
"Depreciation of assets worldwide, more severe credit conditions, weak demand and 
rising unemployment could lead to the formation of a deflationist spiral" is shown in the 
report.  
This  situation  is  likely  to  push  some  countries  to  promote  dangerous  long  term 
investment policies, says the study, carried out by consulting about one hundred of senior 
policy makers, economists and university scientists. 
“Massive expenditure provided by governments to help financial institutions threatens 
the  already  precarious  budgetary  situation  of  countries  like  the  United  States,  the  UK, 
France, Italy, Spain and Australia”, WEF believes.  
WEF fears of a slowdown stronger than that foreseen for China (an increase of 6% or 
even lower), a country faced with declining exports and strongly exposed to a devaluation of 
the dollar. A "painful landing" for China could further exacerbate the global economic crisis.  
Only a "global action" could limit the damage, the study concludes, according to which 
the current financial crisis has revealed a lack of coordination of policy makers globally, 
"2009 offers a backup time of global governance and building of the political will to restore 
financial stability," argues WEF.  
According to the report, in 2009 the risks related to economic policies oriented innward, 
taken by some emerging countries, become more acute, but new risks related to regulatory 
costs, fraud or loss of data, flooding, air pollution and diminishing biodiversity appear, too.  
The World Economic Forum warns that global governance is required on issues such as 
financial stability, trade, climate change, water and security.  
It is also important that the Financial Regulations which nowadays appear, to keep a 
balance between solving the current problems and not to hindering innovation in the future, in 
areas such as climate change, limited resources and infrastructure.  
Review of General Management                                                Volume 11, Issue 1, Year 2010  81 
The effects of global crisis began to be felt in 2008. According to the UN’s report, 
growth of the global economy is increasing less and less in recent years.  
The International Monetary Fund draws attention on financial markets around the world. 
Representatives of the IMF say that the global economy is heading in a worrying direction. 
Statements come while the UK government’s data have recently shown that the UK is in 
recession. Moreover, Germany, Japan and the euro area countries are already in recession.  
The engines of the global economy will stop this year, registering the lowest growth rate 
since  the  Second World  War,  due  to  the  severe  recession  of  the  industrialized  countries, 
which  will  cause  damage  to  economies  and  developing  countries,  too,  the  International 
Monetary Fund (IMF) warned.  
Fund’s projections indicate an advance of the global economy of just 0.5% and estimate 
losses caused by the banking crisis of 2,200 billion euro, according to the World Economic 
Outlook.  
According to IMF, advanced economies will have the strongest contraction, reducing 
themselves with 2%; two months ago it was said they would have a negative growth of 0.3%.  
“We expect the global economy will stop”, said Olivier Blanchard, IMF chief economist. 
Simultaneous recession in the economies of the United States, Japan and the euro area will be 
more severe than we suspect. Recession of the U.S. economy will be 1.6%, and Japan will fall 
by 2.6% in 2009. The euro area will suffer a decrease of 2% of GDP, which occurs after an 
increase of 1% in 2008.  
Regarding Romania, it will lose at the exports chapter. Eastern Europe, Romania being 
part of this region, too, will slide into recession this year because of the collapse of demand 
for its products for export and, in general, due to the falling of the consumption of goods 
produced in the area.  
Analysts say the IMF’s report should be interpreted as a serious warning against the 
danger that small economies, such as Romania, have severe problems in 2009.  
Economic  analyst  Matthew  Peacock  says:  “If  large  economies  decline,  exports  are 
reduced instantly. Globally, there will be a rush for money, and the competition for funding 
will be fierce”.  
Billionaire George Soros, warned that the current governmental programs to support the 
economy are insufficient and calculated that just to save the U.S. banks 1,500 billion dollars 
would be needed. He suggested the IMF should use its own international currency, known as 
Special Drawing Rights (SDRs), to pump more money into the global economy. His comment 
was a response to the IMF’s announcement according to which the international financial 
institution could run out of money, if all potential claims were to be met.  
  
Volume 11, Issue 1, Year 2010                                                        Review of General Management  82 
2. The issue of jobs in the world 
 
Companies all over the world announced that they will eliminate appreciatively 70,000 
jobs, due to the worsening of the crisis which started in the banking sector.  
For example, in New York, the manufacturer of construction equipment, Caterpillar, 
announced that it intends to eliminate 20,000 jobs worldwide, to cope with decreased sales, 
and the mobile operator Sprint Nextel announced the elimination of 14% of its staff and 8,000 
jobs.  
In Japan, the top 12 auto manufacturers reduced, in 2008, approximately 25,000 jobs, to 
cope with the crisis in the automotive sector, is shown in a survey published by Jijia Press.  
In Europe, the banking and insurance Dutch ING group announced the elimination of 
7,000  jobs and  an agreement  by  which  the  Netherlands  will  take  over  80  percent  of  the 
portfolio of the risky assets of the group, valued at 27.7 billion euros. The Dutch manufacturer 
of electronic equipment Philips removed approximately 6,000 jobs.  
It is interesting to notice that the U.S. President Barack Obama, plans to save the U.S. 
economy from a paralyzing recession. The U.S. Congress has started the plan of stimulating 
the economy, worth 825 billion dollars.  
In  his  first  radio  message  from  the  presidential  installation,  Obama  warns  that  the 
economic problems will not be solved in a short period of time, but has expressed hope that 
the determined plan will remedy the situation. "If we do not take rapid and bold measures, the 
bad situation could worsen", the new American president said.  
In a speech held in front of the press, the British Prime Minister Gordon Brown called 
on governments to avoid pessimism and avoid falling into "financial protectionism", with 
dramatic consequences for the economy and jobs. 
 
3. Measures to combat financial crisis worldwide 
 
An international collaboration to obtain the substantial involvement of all participating 
countries  and  more  investment  in  technologies  with  low  emissions  of  carbon  dioxide  is 
needed to alleviate a crisis much larger than that of loans, is the conclusion drawn by four 
important  executive  directors  of  international  companies,  in  an  analysis  published  by  the 
Copenhagen Climate Council.  
"The measures taken in response to the financial crisis showed that there is a possible 
bold reaction, coordinated at the international level, to a global problem," said Samuel A. 
DiPiazza Jr. Executive Director of PricewaterhouseCoopers International Limited, James E.  
Review of General Management                                                Volume 11, Issue 1, Year 2010  83 
Rogers,  Executive  Director  Duke  Energy,  Anders  Eldrup,  Executive  Director  of  DONG 
Energy and Rob Morrison, Chairman of CLSA Asia-Pacific region.  
The impact of financial crisis, including the alarm signals ignored in the past, shows the 
risks and dangers of the lack of action. Studies show that the possible impact of climate 
change  could  significantly  reduce  consumption  worldwide.  Meanwhile,  a  quick  reaction, 
whose  costs  would  be  1%  of  GDP,  could  substantially  reduce  the  risk  of  more  serious 
repercussions. Worldwide crisis measures, as decided at the Summit G20 in Washington, are 
required to tackle global warming and accelerate the economic costs associated with it.  
The authors of the studies urge world leaders to set a price for the gas emissions that 
lead to the greenhouse effect and also require: 
- effective regulations on carbon emissions, to include more sectors of activities and 
more countries,  better connected and more ambitious  with regard to the establishment of 
substantial reductions and duration of emissions; 
- completion, by governments, with regulations of measures generated by market, such 
as  rules  on  energy  efficiency  in  transport  and  housing  sector  and  encouragement  of 
sustainable practices;  
- more direct governmental investments, through public-private partnerships, to support 
the development, introduction and presentation of environmental technologies such as carbon 
capture and storage. 
Anders Eldrup, chief executive of DONG Energy, says that "to reduce CO2 emissions 
effectively, we need a wider framework than the present one. At the international level we 
should develop a more effective emissions trading scheme. At the national level, increased 
support from the public for research and development, new technologies and more stringent 
rules on energy efficiency are key instruments for reducing emissions. Climate change is 
emerging from a multitude of cases, so the framework should have broader and multiple 
purposes, targeting emissions from all sectors of the economy, including energy, transport 
and agriculture". 
Valentin  Durigu,  Senior  Manager  in  the  Department  of  indirect  taxes, 
PricewaterhouseCoopers Romania, says that “Romania is on track, as co-signatory of the 
Kyoto Protocol, and follows the steps needed to fulfill commitments made by this protocol”. 
The  Romanian  government  approved  the  state  budget  for  2009,  and  then  a  set  of 
measures to combat the economic crisis was adopted too.  
For the next period, Romania will propose the following measures to fight the economic 
crisis:  
Volume 11, Issue 1, Year 2010                                                        Review of General Management  84 
1.  The  government  will  allocate  20%  of  2009  budget  for  public  investment  in 
infrastructure - transport, environment, education, health etc. This measure aims to support 
the creation of new jobs; 
2. Government debt legacy left by the former executive will be paid to avoid the risk of 
blocking the economy; 
3. Increasing the absorption degree of EU funds;  
4. The waiving of tax on reinvested profit (this measure will be implemented in 2010);  
5. Entrepreneurs will be able to compensate for the VAT recovered by the paid, but also 
with other budgetary obligations, in order to remove bottlenecks in the economy; 
6. Government decided capitalization of CEC and Eximbank;  
7. Setting up the Counter-guarantee Credit Fund for SMEs and within the CEC, the fund 
for financing SMEs; 
8. Promotion of exports supported by the allocation from the state budget of the same 
amount approved for 2008; 
9.  Continuing  the  "Rabla"  program,  which,  unlike  the  previous  years,  provides  the 
acceptance of old cars up to 10 years and the increase of the amount granted from 3000 to 
3800 lei; 
10.  Including  the  revenue  of  the  institutions  and  government  agencies  in  the 
consolidated  state  budget  (such  income  will  be  used  in  the  general  interest  and  not  the 
particular persons who lead these agencies). 
 
4. Conclusions 
  
From those presented above, we can draw the conclusion that the world states lack fiscal 
measures. We should not forget that the IMF has asked world governments for a package of 
fiscal measures, amounting to 1,200 billion dollars, to overcome the problems caused by the 
collapse of demand, as a result of the credit crisis.  
According  to  IMF  experts,  a  global  economic  recovery,  which  will  face  major 
difficulties, will begin at the end of 2009 or first months of 2010.  
Also, environmental issues must not be forgotten whereas international collaboration to 
obtain  the  substantial  involvement  of  all  participating  countries  and  more  investment  in 
technologies with low emissions of carbon dioxide, are necessary to alleviate a crisis much 
larger than credits. This will guide the choices of consumers, companies and governments and 
will be  the  basis of strengthening an economy  characterized by low  emissions of  carbon 
dioxide by 2050.  
Review of General Management                                                Volume 11, Issue 1, Year 2010  85 
Ion Petrescu, the renowned professor, said the following: "We have an obligation not 
only to analyze but also to learn" (2006). The impact of financial crisis, including the alarm 
signals ignored in the past, shows the risks and dangers of inaction. 
Studies  show  that  the  possible  impact  of  climate  change  could  significantly  reduce 
consumption worldwide.  
 
References 
 
1.  Anvers, D., (1991), Economia mondială, Editura Humanitas, Bucureşti  
2.  Bari, I., (2001), Globalizare şi probleme globale, Editura Economică, Bucureşti  
3.  Petrescu, I., (2006), Managementul crizelor, Editura Expert, Bucureşti 
4.  Stiglitz, I., (2003), Globalizarea. Speranţe şi deziluzii, Editura Economică, Bucureşti  
5.  http://www.conso.ro/ 
6.  http://www.financiarul.com/  
7.  http://www.un.org/esa/policy/wess/wesp.html  
8.  http://ultimaora.phg.ro/ 
             
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
 
 
 

FINANCIAL CRISIS IMPACT ON WORLD STATES IN 2009

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