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ECB will do what it takes to restore confidence
(Agencies)
Updated: 2008-10-20 08:15 The head of the European Central Bank on Sunday pledged to do whatever it takes to restore confidence to rocky markets, as governments world-wide pour cash into banks and financial markets hit by the worse economic crisis since the Great Depression.
Governments are looking to put into place measures to shore up their economies and global growth as the crisis spreads throughout the world. They have pledged about $3.2 trillion -- about equal to the economic output of Germany -- to guarantee bank deposits and bank-to-bank lending, and in some cases have taken stakes in banks that are awash in bad assets. ING will gain two government representatives on its board who will have veto power over certain decisions, in return for the huge capital infusion. The moves come on top of huge cash injections into money markets and coordinated interest rate cuts to offer some respite to money markets, which have been gripped by the fear of more bank failures after U.S. investment bank Lehman Brothers went bankrupt. Still, with markets ready to open for what will likely be another week of neck-braking volatility, efforts to break open a liquidity lock-down appeared to be paying off in the form of tighter credit spreads. ECB Governing Council members Erkki Liikanen of Finland and George Provopoulos of Greece said rates would fall as trust increases between banks following the measures taken by central banks and governments. Top White House economic adviser Edward Lazear told CNN the first stages of that process are under way. "The numbers are going in the right direction," he said. The Blame Game The crisis has raised fears in the West that many countries could enter recession this year and next. Spain was the latest country to say it would fall into recession in 2009 if the global economy suffered that fate. Japan, the world's second biggest economy, is set to slash its economic forecasts this month, Bank of Japan board member Atsushi Mizuno was quoted as saying. In an interview with French media, ECB President Jean-Claude Trichet said Europe faces a "very important growth slowdown." Trichet put the blame on the price shock from months of high energy prices as well as the financial crisis. Lazear, meanwhile, said that "parts" of the United States seem to be in recession based on jobless rates much higher than the national average. For China, a country that will stave off the financial meltdown, no doubt with some bruises, the culprit was clear -- it was the West's fault. The official Xinhua news agency, in an opinion piece, blamed U.S. consumers for fueling the crisis with years of reckless spending that, once it ended, pulled the rug out from under the world economy. |
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