euro|topics - Black Monday

Main focus of Tuesday, September 16, 2008

Black Monday

The international financial system has been rocked by one of the biggest bank collapses in history. The bankruptcy of Lehman Brothers, the fourth largest US investment bank, led on Monday to dramatic stock market losses across the world. What consequences will the crisis have for European and international financial systems?

Delo - Slovenia

According to the daily Delo the impact of the US financial crisis on the rest of the world is growing. "It looks like the American financial system is facing growing difficulties and there will be even more scapegoats. The financial system only has itself to blame for these [problems] because it exercised too little control, was too greedy and failed to consider the risks. .. The international financial crisis has long been a global problem. The EU in particular is very cautious in its approach [to dealing with the problem]. At the EU's most recent financial summit in Nice it was, so to speak, taboo to talk about a recession. ... But the plunge in stock prices witnessed yesterday in Europe and across the world ... is an indication that the turbulent times are not over yet. ... The entire global economy will go on paying the huge bill Wall Street was landed with for a while yet." (16/09/2008)

Frankfurter Rundschau - Germany

The Frankfurter Rundschau anticipates the effects the American financial crisis will have on European banks: "No one should be surprised if the central banks soon have to intervene directly in the financial markets, for example to back the dollar or to save the stock markets from collapse. And it is entirely possible that more banks will topple, in Europe as well. ... Not since the end of World War Two has systemic risk required such hands-on measures. Under the term systemic risk experts understand the risk of chain reactions. ... That is: losses will accrue everywhere. But will these be absorbed everywhere? If things take a sharp turn for the worse, European taxpayers ... will have to pay billions of euros to save local banks, returns from life insurances and other retirement provisions will decline sharply, and the crisis will bestow upon Europe millions of unemployed. Thank you America!" (16/09/2008)

El País - Spain

In view of the stockmarket crashes around the world, El País newspaper speaks of "the worst financial crisis since 1929", and states that a lesson must be learned: "The lesson we must learn from this crash is that the complex financial world needs equally complex supervisory mechanisms, and that state intervention to save banks is only justified if the American system complies to strict controls of financial risks. If this lesson goes unheeded, the global economy will be permanently threatened with systematic crises brought on by irresponsible behaviour. The market economy will then turn into a game of publicly financed roulette. ... In the current panorama of downturn, one should remember that the European economies - even if in principle they are free from the wrongful practices that engendered the crisis - will nevertheless feel its impact, at least as hard, if not harder than the US." (16/09/2008)

Financial Times - United Kingdom

With an eye to Lehman Brothers' bankruptcy, the Financial Times prophesies dire consequences for bank regulation: "The world has not ended. The international economy has not yet collapsed. But one thing is now quite clear: the banking system as we know it has failed. ... There will now be renewed calls for more regulation, and understandably so. But it is naive to think that the right regulatory response is obvious. From poor governance to flawed incentives, incompetent risk management to foolish strategies, the failures of the financial system have been so widespread as to render a coherent regulatory riposte impossible. The likely outcome is that tight capital requirements will be forced to serve as a catch-all response to risk. If so, the banking system will look more like that of the 1960s – a low-risk, low-return utility business. The ambitious and the avaricious will no doubt seek more exciting hunting grounds with hedge funds and private equity groups." (16/09/2008)

» To the complete press review of Tuesday, September 16, 2008

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