The Financial Crisis
This week, the European press is focused on the turmoil engulfing world markets. The term 'credit crunch' has been replaced by 'financial crisis', reflecting the emergency's severity.
As markets opened on Monday, shares plummeted globally. US stocks hit five-year lows, and major Asian indices like Japan's Nikkei fell sharply.
This downturn continues despite massive government interventions in the banking system.
- The US Congress passed a $700bn bail-out plan to buy bad mortgage debts.
- Iceland's economy neared bankruptcy, prompting emergency legislation.
- The UK government offered £50bn to banks for stakes and £250bn in loans to increase liquidity.
The credit crisis is affecting smaller businesses through higher loan rates and reducing consumer confidence, impacting sales.
If the rescue plans succeed, taxpayers could profit. If they fail, the banking system may collapse. The situation may escalate from a 'financial crisis' to a 'severe economic recession'.