Trichet warns China-style stimulus not for all

By Tomasz Janowski

SINGAPORE (Reuters) - European Central Bank chief Jean-Claude Trichet warned that many nations lacked the fiscal ammunition to take a cue from China and spend billions of dollars to ride out the global financial storm.

Beijing pitched in nearly $600 billion to the global campaign to stave off the worst downturn in decades to the applause of markets and policymakers who had looked to China to do its bit to help the faltering global economy.

While there is mounting evidence that the United States, Japan and much of Europe are in recession, the world's fourth-largest economy is still growing, abeit it at a slower pace than the heady double-digit growth of the past six years.

The news of Beijing's stimulus plan buoyed Asian stock markets and drove commodity prices higher. Tokyo shares gained close to 6 percent despite a grim manufacturing orders report and markets elsewhere in Asia rose almost 3 percent.

But Trichet said that while some countries were well placed to pump-prime their economies, many lacked sufficient leeway in their budgets.

"They already have deficits now, which are very substantial, and for them the room for manoeuvring does not exist," he told Brazilian TV after a meeting in Sao Paulo of the Group of 20 of the world's major economies.

Some euro zone nations are set to breach the European Union's budget deficit cap of 3 percent of gross domestic product this year and others have to tread carefully to stay within the limit, which the EU aims to enforce despite the financial turmoil.

In the United States, the budget is already creaking under the burden of the Iraq war and $700 billion earmarked for bank bailouts.