In 2008, the world was thrust into what has been called the worst recession since the Second World War. Many countries responded with multibillion dollar stimulus packages in attempt to stave off the recession or at least dampen the effects. The British government took multiple steps to soften the blow of the global financial crisis. Relative to its counterparts, has the U.K. done enough?

The list below examines each country's response to the financial crisis on the basis of fiscal stimulus spending relative to GDP. Data estimates were provided by the IMF.

United Kingdom
Size of stimulus: 0.2 % of GDP (2008), 1.4% of GDP (2009)
GDP growth rates from 2008: 0.742%, GDP estimate for 2009: -4.385%

In October 2008, the British government announced a 500 billion pound stimulus package to shore up the nation's financial system. Like the U.S., banks did not use the capital to lend as they were expected to. In November, officials introduced a 15 billion pound stimulus package to reduce the country's sales tax and increase spending.

In December 2008, U.K. Prime Minister Gordon Brown announced an "ambitious" stimulus package agreed to by the nations of the European Union. As ambitious as the 200 billion euro deal may have seemed, the IMF warned that even more action was necessary to "avoid a long-lasting crisis."

Expected stimulus in 2010: -0.1% of GDP

United States of America
Size of stimulus: 1.1% of GDP (2008), 1.9% of GDP (2009)
GDP growth rates from 2008: 0.439%, GDP estimate for 2009: -2.73%

The United States was at the forefront of the global economic crisis. Domestically, two stimulus packages, totaling almost $1 trillion, were enacted to save ailing banks and jumpstart the struggling economy. Internationally, the Federal Reserve and foreign central banks worked together with coordinated rate cuts and liquidity infusions to unfreeze credit markets and prevent the collapse of financial markets worldwide.

An official end to the U.S. recession has yet to be declared; unemployment and a high deficit are lingering concerns. (Recovering from an economic slump isn't the easiest thing to do, but here are a few potential methods of rebuilding. Check out Profiting From A Consumerless Recovery.)

Expected stimulus in 2010: 2.9% of GDP

China
Size of stimulus: 0.4% of GDP (2008), 2% of GDP (2009)
GDP growth rates from 2008: 9.007%, GDP growth rate for 2009: 8.504%

China responded to the global crisis by announcing a stimulus plan in November 2008. The plan entailed a four trillion yuan stimulus, with about 30% coming from the central government and the remainder coming from the reallocation of funds at the provincial and local levels. Big ticket items included public infrastructure, earthquake reconstruction, rural development and technology advancement.

Expected stimulus in 2010: 2.0% of GDP

Japan
Size of stimulus relative to GDP: 0.4% (2008), 1.4% (2009)
GDP growth rates from 2008: -.705%, GDP estimate for 2009: -5.369%

Japanese banks were able to escape the worst of the crisis due to their relatively low exposure to toxic assets and limited involvement in securitization. However, the country's economy has suffered since it is heavily driven by exports. Japan enacted its first stimulus in 2008, and the country's economy emerged from the recession in the second quarter of 2009. In December 2009, deflation, the rising yen and lagging global economic conditions moved Japan's government to announce an additional 7.2 trillion yen stimulus package.

Expected stimulus in 2010: 0.4% of GDP

Australia

Size of stimulus: 0.7% of GDP (2008), 0.8% of GDP (2009)
GDP growth rates from 2008: 2.354%, GDP estimate for 2009: 0.732%

Decreased export revenue and falling commodity prices have taken a toll on the Australian economy. However, the economy "down under" remains stronger than many other nations. In October 2008, Australia orchestrated its first round of stimulus by offering bonus payments to first-time homebuyers and families based on income and children.

In February 2009, the Australian government approved the Nation Building - Economic Stimulus Plan, a $27 billion fiscal stimulus package aimed at supporting jobs and boosting growth. (The subprime meltdown gave rise to a mouthful of financial acronyms. Learn how to sort through this alphabet soup in Bailout Acronyms 101.)

Expected stimulus in 2010: 0.3% of GDP

Canada
Size of stimulus: 0% of GDP (2008), 1.5% of GDP (2009)
GDP growth rates from 2008: 0.414%, GDP estimate for 2009: -2.479%

Strong capitalization and conservative lending may have kept Canadian banks from going under, however, tight credit and rising commodity prices have hurt the Canadian economy. Canada was the only G7 nation to experience positive GDP growth during the second and third quarters of 2008, and the Canadian economy shrank by less than all other G7 nations in the final quarter of the year. In January 2009, the Canadian government introduced its Economic Action Plan to combat the crisis, boost the country's economy and create jobs.

Expected stimulus in 2010: 1.3% of GDP

Germany
Size of stimulus: 0% of GDP (2008), 1.5% of GDP (2009)
GDP growth rates from 2008: 1.248%, GDP estimate for 2009: -5.297%

Decreased demand for industrial goods sent German exports downhill. In November 2008, the German government passed a $29 billion stimulus package, which was met with skepticism by critics claiming less than half of the money was new. Additional stimulus measures were passed in January 2009, when the German government authorized a $70 billion plan including personal tax cuts and increases in spending.

Expected stimulus in 2010: 2.0% of GDP

France
Size of stimulus: 0% of GDP (2008), 0.7% of GDP (2009)
GDP growth rates from 2008: .323%, GDP estimate for 2009: -2.358%

In December 2008, the French government announced a 26 billion euro stimulus package to go into effect in 2009. The plan provided several initiatives such as making cash payments to the poor, offering increased rebates to new car buyers and boosting funding for modernization of rail infrastructure, energy and the postal service. (The bear market of 2008 was a game-changer for many investors. Find out what lessons you can take away from it in 5 Lessons From The Recession.)

Expected stimulus in 2010: 0% of GDP

Italy
Size of stimulus: 0% of GDP (2008), 0.2% of GDP (2009)
GDP growth rates from 2008: -1.04%, GDP estimate for 2009: -5.145%

Italy is often referred to as "the sick man of Europe." Coincidentally, the country responded to the global financial crisis with the smallest stimulus package (relative to GDP) on our list. In November 2008, the Italian government approved a $103 billion stimulus package. The plan drew criticism from economists saying the vast majority of the package was the "recycling of funds already available."

In February 2009, Italy passed an additional stimulus package worth $2.56 billion.

Expected stimulus in 2010: 0.1% of GDP

The Bottom Line

Although the U.K. may not have responded with the world's most robust stimulus package, the government acted with relatively quick and varied measures to respond to unprecedented turmoil. Unfortunately, the impact of such massive efforts cannot be felt or measured as quickly as they were enacted. Only time will tell if the efforts were enough.

Related Articles
  1. Fundamental Analysis

    Is India the Next Emerging Markets Superstar?

    With a shift towards manufacturing and services, India could be the next emerging market superstar. Here, we provide a detailed breakdown of its GDP.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  3. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
  4. Mutual Funds & ETFs

    ETF Analysis: ETFS Physical Platinum

    Learn about the physical platinum ETF. Platinum embarked on a bull market from 2001 to 2011, climbing to record prices along with other precious metals.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Turkey

    Learn about the iShares MSCI Turkey exchange-traded fund, which invests in a wide variety of companies' equities traded on Turkish exchanges.
  6. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total World Stock

    Learn about the Vanguard Total World Stock exchange-traded fund, which invests in stocks located in numerous countries with a high level of diversification.
  7. Markets

    Moral Hazard in the Chinese Market

    The Chinese government faces the issue of balancing its desire to maintain stable markets through manipulation with the danger of a looming bubble if stock prices run up too much.
  8. Mutual Funds & ETFs

    ETF Analysis: SPDR EURO STOXX 50

    Learn about FEZ, the Euro Stoxx 50 ETF. FEZ tracks the 50 largest companies in Europe, making it the Dow Jones Industrial Average of Europe.
  9. Stock Analysis

    The Best Stocks to Buy for Less than $10 before Year End

    Learn about the best stocks to buy under $10. These stocks are speculative but have considerable upside given their valuation and market conditions.
  10. Economics

    A Look at Greece’s Messy Fiscal Policy

    Investigate the muddy fiscal policy, tax problems, and inability to institute austerity that created the Greek crises in 2010 and 2015.
RELATED TERMS
  1. Brazil, Russia, India And China ...

    An acronym for the economies of Brazil, Russia, India and China ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has ...
  3. Emergency Banking Act Of 1933

    A bill passed during the administration of former U.S. President ...
  4. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  5. Optimal Currency Area

    The geographic area in which a single currency would create the ...
  6. European Monetary System - EMS

    A 1979 arrangement between several European countries which links ...
RELATED FAQS
  1. Is Argentina a developed country?

    Argentina is not a developed country. It has one of the strongest economies in South America or Central America and ranks ... Read Full Answer >>
  2. Is Brazil a developed country?

    Brazil is not a developed country. Though it has the largest economy in South America or Central America, Brazil is still ... Read Full Answer >>
  3. Are Social Security payments included in the US GDP calculation?

    Social Security payments are not included in the U.S. definition of the gross domestic product (GDP). Transfer Payments For ... Read Full Answer >>
  4. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  5. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  6. Is the Social Security administration a government corporation?

    The U.S. Social Security Administration (SSA) is a government agency, not a government corporation. President Franklin Roosevelt ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!