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Trouble Tracks Far and Wide
Trader Wayne Plowman signals on the floor of the S& P 500 pit at the Chicago Mercantile Exchange. The credit crisis shook equity markets around the world.
(By Tim Boyle -- Bloomberg News)
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Some financial experts said concern over the unknown and the lack of transparency in world financial institutions is driving some of the chaos. "There is a credit fog," Ostwald, the strategist, said. "No one knows who has what, and people are worried that they may have losses in credit markets."
French Finance Minister Christine Lagarde cut short a vacation and returned to Paris Thursday "because of the stock exchange situation," a ministry spokesman said.
World leaders and financial analysts cautioned against panic, saying the world's largest economies and major international corporations are strong enough to weather the fluctuations. Sarkozy released a letter he sent to German Chancellor Angela Merkel saying he did not think the subprime mortgage crisis would affect economic growth in France and Germany.
Figures released this week by European Union officials showed that economic growth slowed across Europe in the second quarter, even before the latest global market turmoil.
Analysts said the greatest problem in curbing the slide is the psychological fear factor. "It's difficult to stop something like this," said Peter Westerheide, a specialist in international financial markets at Germany's Center for European Economic Research. "The problem is the chain reaction that has been set off. You see that there are fires starting in all possible corners, and that is what makes it hard to control."
He added, "The world economy is in good shape. Yes, this will slow it, but there is no reason to fall into a state of great pessimism."
Researchers Karla Adam in London and Shannon Smiley in Berlin contributed to this report.
