By Jan Strupczewski
BRUSSELS (Reuters) - The European Commission on Tuesday promised measures to get state-aided banks to start lending to the real economy but EU finance ministers squabbled over ways to push back against the global financial crisis.
Across the globe, Australia slashed interest rates -- others are expected to follow this week -- and the Bank of Japan moved to ease the plight of Japanese companies squeezed for cash.
With the United States in recession, according to the nation's business cycle arbiter, Asian equities tumbled. But European shares turned positive by mid-morning as U.S. stock index futures rose and energy companies gained after crude prices pared losses.
On the corporate front, Toyota Motor Corp said it would chop management bonuses by 10 percent as it cuts back production in the face of collapsing demand.
The world's number one carmaker was just one of many prominent global companies struggling to slash costs in the face of the worst financial crisis since the Great Depression.
In Brussels, European Union Competition Commissioner Neelie Kroes, facing pressure from member states to approve state aid to ailing banks, said the EU executive would approve new rules before Christmas.
Kroes said in a statement after meeting EU finance ministers that the Commission expected banks that received state aid to give commitments to lend to the real economy.
Finance ministers from all 27 EU nations had gathered in Brussels to discuss a proposal for governments to spend an extra 1.2 percent of GDP from their budgets to boost investment and consumer demand.
On Monday, Germany rejected pressure to do more in Europe's battle with recession and said it would not to be lured into what Chancellor Angela Merkel called a "senseless" spending contest.
German Finance Minister Peer Steinbrueck said on Tuesday Berlin, Paris and other EU capitals were also unhappy with the Commission approach to vetting state aid to banks.
The Commission ruled proposed German assistance for Commerzbank did not meet EU rules on state aid.
THE PAIN IN SPAIN
Spain took a blow on Tuesday when official figures showed the number of Spaniards out of work rising by 171,243, or 6 percent, in November to a total unemployed of nearly 3 million.
Australia's Reserve Bank cited the perilous state of the world economy when it cut the benchmark cash rate by a full percentage point to 4.25 percent.
Britain, the euro zone and New Zealand will almost certainly cut interest rates later this week. In addition to more rate cuts, the U.S. Federal Reserve is weighing other responses with its benchmark rate nearing zero.
The Bank of Japan kept its key rate at 0.30 percent an emergency meeting to deal with a cash squeeze on Japanese companies, which face slumping export markets.
It unveiled 3 trillion yen ($32 billion) in new measures help corporate funding. The BOJ will accept a wider range of corporate debt as collateral and launch a new scheme to make it easier for banks to make loans to companies.
The crisis, triggered by U.S. mortgage defaults that destroyed banks from Wall Street to Iceland, has piled pressure on policymakers to ramp up their response, including sweeping interest rate cuts by the major central banks.
Fed Chairman Ben Bernanke said on Monday further cuts in the U.S. benchmark rate below 1 percent were "certainly feasible." He also said the central bank could take steps such as buying "substantial quantities" of longer-dated U.S. government debt.
In Asian markets, Japan's Nikkei average tumbled 6.4 percent as the yen surged. Hong Kong's Hang Seng index lost 5 percent.
"Investors knew the economy was bad, but a series of economic indicators showed it had deteriorated far more than expected," said Soichiro Monji, a chief strategist at Daiwa SB Investments. "It's become clear that it's not just the United States but everyone."
But in Europe, shares turned positive.
The FTSEurofirst 300 index of top European shares was up 0.1 percent at 810.52 points, having been down as low as 792.43 points earlier. Futures for the Dow Jones, S&P 500 and Nasdaq were up between 1.6 and 1.7 percent.
Euro zone producer prices fell more than expected month-on-month in October, data showed, registering 0.8 percent drop against September for annual rise of 6.3 percent and underlining the scope for a deep ECB interest rate cut.
"The message for the ECB is clearly: don't worry about inflation, cut now, and a lot. I would say 75 basis points, it's a minimum," Bank of America economist Holger Schmieding said.
Britain's construction sector shrank last month at its fastest pace in more than a decade, a survey showed on Tuesday.
BANKERS' BLUES
The pain also reached deeper into the workplaces of big financial players.
Switzerland's Credit Suisse AG and Britain's HSBC are axing hundreds of jobs as the worst financial crisis since the 1930s continues to bite.
Credit Suisse will shed 650 jobs and HSBC, Europe's biggest bank, said it was cutting 500. Around 90,000 jobs have been axed at major global banks since September.
The Wall Street Journal reported Goldman Sachs was likely to report a net loss of as much as $2 billion for the fourth quarter.
Tesco Plc, Britain's top retailer, posted its weakest UK sales growth since the early 1990s. It said the success of a new budget range launched to cope with the consumer downturn, attracted more customers but held back sales.
(Additional reporting by Reuters bureaus worldwide; Writing by Angus MacSwan; editing by Mike Peacock)
