Morning Brief: Is the sky falling?

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As world leaders prepare to descend on Washington for the upcoming G-20 summit, the grim economic news just keeps coming.

In the United States, consumer spending has fallen off a cliff and the fate of the auto industry hangs in the balance. Shares in General Motors dropped below $3 Tuesday, continuing a downward slide that accelerated after a particularly dire third-quarter earnings report. Bankruptcy looms unless the U.S. Congress can put together an effective rescue deal.

The Bush administration yesterday announced new measures to help homeowners renegotiate their mortgages, but critics — including the Republican chair of the FDIC — fear the move won’t have a big-enough impact.

Meanwhile, new data from Europe, China, and South Africa suggest the long-feared global recession has finally arrived. Oil prices, accordingly, have fallen below $60, a level not seen for 20 months.

Former Canadian PM Paul Martin hopes the G-20 summit will lead to greater input from emerging economies such as China and India. “Do what you think is necessary with the Bretton Woods institutions, but for heaven’s sake, stop keeping half the world out of them!” he tells FP.

U.S. President-elect Barack Obama will not attend the meeting, the Guardian reports. Nor will he meet any leaders on the sidelines, according to the New York Times.

Raghuram G. Rajan, former chief economist at the IMF, doesn’t expect sweeping changes at the summit, but warns that “if enough of the other countries make their voices heard at this meeting and say ‘we are not willing to go along with incremental change,’ it does put a lot of pressure on the Obama administration to respond, because this is a crisis that was made in America.”

U.S. Presidential Transition

Top intelligence officals expect to lose their jobs when Obama takes power.

Closing the Guantanamo Bay prison is said to be a priority for the incoming Obama administration, but potential snags remain.

Americas

Joshua Partlow analyzes the return of the Shining Path, the Peruvian rebel group.

Time profiles a site in Mexico that reenacts the trauma of crossing illegally into the United States.

Asia

A U.S. aid offical was shot dead in Peshawar, Pakistan.

North Korea threatened to close its land border with South Korea.

A Chinese company has signed a $3.5 billion oil deal with Iraq.

Fourteen democracy activists in Burma received harsh prison sentences.

Middle East and Africa

Iran test-fired new missiles along its border with Iraq.

Voters in Jerusalem rejected the ultra-Orthodox incumbent and elected Nir Barkat, a secularist, as mayor.

Sudanese President Omar Hassan al-Bashir announced an “immediate unconditional ceasefire” in Darfur.

Insurgents have seized control of Merka, a port city in Somalia.

Europe

Norway leads the world in closing the gender gap, according to new rankings by the World Economic Forum.

British unemployment has reached its highest rate since 1997. British PM Gordon Brown is calling on governments to coordinate their stimulus plans.

Europeans are wondering whether they can have their own Obamas.

Today’s Agenda

U.S. Defense Secretary Robert Gates is attending a meeting of NATO defense ministers in Estonia to discuss Ukraine’s NATO bid.

U.S. Treasury Secretary Henry Paulson is holding a 10:30 a.m. press conference on the $700 billion Wall Street bailout.

The U.S. Geological Survey is due to release an unprecedented study of the world’s natural gas resources.

Saudi Arabia leads a U.N. conference on interfaith dialogue.

Photo: Bill Pugliano/Getty Images