The credit crisis that has been a major issue in the United States lately has spread fear through European governments as they saw the need to step in with a flurry of major bank bailouts in different countries from Iceland to Germany. The governments of Belgium, Luxembourg, and the Netherlands have been taking partial control of some of their national banks. Furthermore, the government of Iceland seized control of Glitnir bank – the third largest in the country. However, these rapid bailouts are not making banks in Europe feel more secure as they keep on refusing to lend to each other money for all but the shortest periods of time. Meanwhile, shares are falling heavily and the money markets remain frozen.
"Despite the rescue packages in the U.S. (and Europe), that doesn't fully correct the problem. I see the problem flowing until late next year," stated UniCredit economist Alexander Koch in Munich.
Another bailout took place in Belgium as shares in Fortis (its largest bank) kept on falling. The bailout was meant to restore confidence in the bank, but this is highly unlikely as governments across the continent are taking actions to save their banks and financial systems. In addition, investors are being skeptic about the effectiveness of a tentative deal in Washington on a plan to buy banks' bad assets and stabilize the financial system.
As British government nationalizes its second bank this year, British Prime Minister, Gordon Brown, says that the British government will do whatever is necessary to ensure the stability of their bank system. At the same time in Germany, Hypo Real Estate Holding AG became the first German blue-chip company to seek a bailout in the global financial crisis.
For the full story, please click on the following link: Bank bailouts sweep Europe.
Update (4:30 pm): It was announced earlier this afternoon that the $700 billion bailout bill in the U.S. was rejected. What this means for the U.S. as well as the larger global economy is something only time will unravel. In the meanwhile, what are your thoughts on the short and long term impact of these recent event on businesses and consumers in the U.S., Europe, and beyond?