Europe's Financial Abyss
da: The Wall Street Journal
The precipitous deterioration of global economic and financial conditions in the last few weeks has come as a shock to most, but the shock seems to have hit Europe’s policy makers the hardest.
Five European banks had to be rescued by their respective governments in the space of a few days and many more came under heavy pressure, their share prices tumbling, as systemic concerns quickly spread from the U.S. to Europe and tremors were felt as far as Asia. All this unfolded against a threatening macroeconomic outlook, with increasing signs that the euro zone and the U.K. might already have slipped into recession, while the U.S. economy takes a turn for the worse.
The prospect of a wave of bank failures has injected a sense of urgency that had so far been lacking in Europe’s response to the credit crisis. French President Nicolas Sarkozy called an emergency meeting over the weekend to discuss possible measures to contain the turmoil. Leaders of Germany, Italy and the U.K. joined him in Paris together with the presidents of the European Central Bank and the European Commission, Jean-Claude Trichet and José Manuel Barroso, and the chairman of the euro group, Jean-Claude Juncker. This rapid mobilization seemed initially to mirror the race against the…
