euro|topics - The financial system in crisis

Main focus of Wednesday, September 24, 2008

The financial system in crisis

Ten days after the bankruptcy of the US investment bank Lehman Brothers, the international financial world is in the throes of a deep crisis. The American government has meanwhile announced it will buy up bad loans amounting to 700 billion dollars. Where does that leave the international financial order?

Süddeutsche Zeitung - Germany

"Why not question the financial system as a whole?" the Süddeutsche Zeitung asks, and argues for central banks to be abolished. "Instead of calling for limits to premiums for bankers and a stricter rule here or a harder regulation there, it is time to start thinking about a new financial order. After all, this is not the first time that crisis management has been introduced as an emergency measure after a large market bubble has burst. It is just the magnitude that has increased with time. Ultimately the citizens are always the ones who have to pay, in the form of unemployment, higher taxes or inflation. ... Until today people have widely believed that crises can only be coped with by making sufficient liquidity available. This gives carte blanche to central banks to act without regard for their own guidelines. ... In a financial system without central banks it would not be possible to cut business cycles short. ... If the market were no longer ready to buy up state securities, governments would have to economise. Then the only creditworthy institutions would be those with sound economic practices." (24/09/2008)

Tygodnik Powszechny - Poland

Against the backdrop of the international financial crisis the liberal weekly Tygodnik Powszechny prophesies a growing distrust regarding the concept of the free market economy: "The present crisis could also have long-term repercussions. In the eyes of the general public the US embodies the capitalism of the free market. US politicians eagerly preached to other countries about the importance of the state not intervening in the economy. And now we have watched the US first allow the international finance markets to virtually collapse and then stage a massive intervention on the market. It has even gone as far as nationalising institutions facing bankruptcy and transferring the huge burden of the debts of private financial enterprises to the shoulders of the taxpayer. This immense gap between theory and practice could lead to a decline in the popularity of the idea of the free market which was never particularly widespread in Poland anyway." (24/09/2008)

Blog Lluís Bassets - Spain

Lluis Bassets, deputy editor in chief of the Spanish daily El País, writes in his blog Del Alfiler al Elefante about the end of an era and the dawn of a new one: "From one wall to the next: from the one that came down in Berlin to the one that changed in New York City [Wall Street] - this era lasted from 1989 to 2008. The history writers can sharpen their pencils. Between the two walls many dominoes have fallen: ideologies, for example, one after another. ... Now we are witnessing the purge of the purge; the collapse of the last victorious ideology. ... The motor which propelled the last era was greed, so now is not the time to start hurling accusations at one another. Capitalism without greed is something altogether different, and Europe knows it well: the social market economy, Rhine capitalism, Christian socialism, etc. These are all terms that provoked compassionate smiles on the other side of the Atlantic and which are now making a comeback with other names. We will see what happens to greed in this new era, and how long it takes for it to regain its former insolence and influence." (24/09/2008)

Népszabadság - Hungary

The Hungarian daily Népszabadság speculates on whether this is the end of capitalism: "Chaos reigns both in the financial world and in people's heads. Even renowned economists are saying that the conservative Bush Administration [with its announcement of plans to give ailing US banks a cash injection of 700 billion dollars] has opted for a socialist solution in its bid to save American capitalism based on free competition. The history of speculation shows us that after a painful period of transition things tend to go back to how they were. But the original state is never completely re-established: the regulating function of the state changes and a slightly different period follows in which entirely new phenomena cause new problems." (24/09/2008)

» To the complete press review of Wednesday, September 24, 2008

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