Global Bankers Anxiously Watch U.S.
Financial Leaders, Exasperated by American Discord, Realize Limits of Own Powers
Wednesday, October 1, 2008; Page A12
BERLIN, Sept. 30 -- Central bankers and elected leaders around the world acknowledged Tuesday that they lacked a comprehensive strategy to protect their countries from the global financial crisis and were as dependent as ever on Washington to come up with a solution.
In Europe, France and Belgium propped up another failing bank Tuesday, and French President Nicolas Sarkozy invited his counterparts from Britain, Germany and Italy to an emergency summit. But officials, exasperated by the defeat of the $700 billion rescue plan in Washington, said they were quickly realizing how little power they had to act on their own to confront a rising threat to their economies and financial markets.
"The Americans have no choice," Christian Noyer, head of the French central bank and a member of the governing council of the European Central Bank, told Germany's RTL radio network. "We must have a comprehensive solution."
Added Patrick Steinpass, chief economist for the German Savings Bank Association: "All I can say is that I simply cannot imagine that the Americans will not come up with some sort of a solution. Anything else is outside the realm of my imagination."
In the meantime, banks continued to fail and markets quivered. Dexia, a lender on the verge of collapse, received a $9.2 billion bailout. It was the fifth time since the weekend that European governments have been forced to rescue a threatened institution, shattering the confidence expressed by many officials as recently as last week that their banks would ride out the crisis comparatively unscathed.
Japan's benchmark Nikkei stock average fell by more than 4 percent Tuesday, closing at its lowest level in more than three years. Trading was suspended in Russia for two hours in response to heavy losses, although markets there later recovered. Other major indexes bounced back from heavy losses Monday, with exchanges in London, Paris and Frankfurt, Germany, posting modest gains.
Major Latin American markets regained lost ground Tuesday, as the Dow Jones industrial average rose 485 points.
In India, politicians assured nervous investors that their accounts were safe. "There is nothing to worry about the Indian market," Finance Minister P. Chidambaram said at a news conference. He noted: "We are suffering the consequences of turbulence around the world."
But anxious customers began to withdraw money from India's largest private bank, ICICI, in what analysts called a lack of faith in institutions that lack government backing.
Economic experts in New Delhi advised India's central bank to make more cash available to lenders to ease a credit shortage and restore investor confidence. Indian companies are mired in a liquidity crunch. Foreign investors -- who have been pulling out of road-building, information technology and real estate projects -- fund many private businesses.
"India and other emerging economies are not isolated, and the idea that they are is a real myth," said Rajiv Kumar, chief executive of the Indian Council for Research on International Economic Relations. "What we see happening is investors from abroad pulling back their investments to improve their balance sheets back home. That offers a real picture of doom and gloom for emerging markets like India."
Smaller countries also tried to calm jittery markets. In Ireland, Finance Minister Brian Lenihan announced a plan to guarantee deposits in domestic banks, without limit, for the next two years. The proposal lifted the Irish stock market after it had dropped by 13 percent Monday. "What we're guaranteeing here is the lifeblood of the banking system," Lenihan said. "Were liquidity to dry up in the Irish banking system in the weeks ahead, the inevitable result would be economic catastrophe for this country."