euro|topics - The ECB attempts to stymie the financial market crisis

Main focus of Friday, August 10, 2007

The ECB attempts to stymie the financial market crisis

The crisis of confidence affecting American mortgages has spread to the Old Continent. The French bank BNP Paribas triggered doubts when it suspended withdrawals from three investment funds in the United States on Thursday, August 9th. The European Central Bank (ECB) has made an emergency intervention, injecting almost 95 billion euros into the financial system. Will this be enough to stop the panic?

La Libre Belgique - Belgium

The editorialist Bernard Slits is surprised by the wave of panic washing over the markets. "Is this as case of irrationality, of mass hysteria or primal fear? Only the future will tell, but what is striking right now is the inability of the planet's big bankers, notably America's Federal Reserve and it's European equivalent (ECB) to find the words and gestures necessary to appease anxiety. Today, markets are literally laying down the law. There are no bumpers or shock absorbers for the bumps and the growing influence of investment funds will not reverse the tendency. The crisis in confidence appears to be deep, structural. ... There is however no great danger for global growth and no reason to think that the stock exchange will not remain an attractive option in the long term, so long is we make it through the tremors, even the most difficult." (10/08/2007)

El Mundo - Spain

"The first institutional sign indicating that we might be approaching the end of a long cycle of economic growth was given by the ECB yesterday", explains the paper. "The ECB's massive injection of funds is aimed to calm markets and help banks deal with their liquidity problems. But this same ECB yesterday admitted in a press release that we are going through 'a nervous period marked by the increased volatility' of money markets. It also made a series of recommendations that imply a fear of a radical drop in economic growth. International stock markets a the first to reflect this uncertainty... . We now have to wait and see how the situation evolves over the next few days. But no one should overlook the red lights that have begun to flash in the middle of the summer." (10/08/2007)

Süddeutsche Zeitung - Germany

"The European Central Bank has sent two entirely contradictory messages," Helga Einecke writes. On the one hand it announced a rise in the base rate in its monthly report for September. On the other it has given financial markets a record money injection in the short term. Einecke points out that this is not in fact a contradiction but the right policy given the current situation. She explains: "In the medium term, meaning over the next one or two years, it wants to take money off the markets because it fears that the liquidity which still abounds in Europe could boost inflation. The ECB has taken the right course of action by giving the nervous players on financial markets a sedative without forgetting its medium-term goal: stable prices for consumers. Moreover, it's good that the financial markets have been forewarned for the month of September and therefore won't get any nasty surprises." (10/08/2007)

La Stampa - Italy

Carlo Bastasin, assistant chief editor of the daily, considers "the ECB's reaction to the crisis that hit Wall Street yesterday was right and convincing. This was a choice that reassures the financial market while showing great stability in Europe. It also allows the ECB to gain clout in relation to the Fed [Central American bank]. ... It is this need for stability that should encourage the penalisation of the risky behaviour of BNP-Paribas, IKB or Banca Italease. There is an epidemic of financial products being sold to clients without informing them of the risks they involve. Not all banks are the same and this crisis an opportunity to distinguish between them. ... For BNP-Paribas, Paris is expected not to react. [The French] Jean-Claude Trichet [president of the ECB] thus has an opportunity to show his autonomy by hitting the French bank that yesterday shook world finances." (10/08/2007)

» To the complete press review of Friday, August 10, 2007

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