Like an unstoppable tide the financial crisis swept from America into Europe.
Suddenly the world was being asked to accept the unthinkable as financial institutions once thought rock solid went bust. But how to tackle the gathering economic storm? The world was divided. America wanted financial stimulus packages. Europe: greater controls. Ahead of the G20 summit the US was playing down differences US Secretary of State, Hillary Clinton: “We want to get the global economy going again. Once the global economy is going again, we need a regulatory framework in place to make sure this never happens again So, we have to do both, and it has to be done simultaneously. Some countries will contribute more on one side that the other, but it must be a collective effort.” The European Union estimates just over 3 per cent of its total gross domestic product is needed for a revival plan. The EU doesn’t want member states getting themselves deeper into debt. EU President José Manuel D. Barroso said: “Among our 27 member states there are different situations. We cannot ask all the member states to do the same. In some cases because they are under programmes of balance of payments supporting, indeed we are asking them to reduce the spending. But generally speaking there is a very important fiscal effort around 400 billion €. It is a very important contribution for Europe and also for the world global demand.” In the United States the crisis led to a dramatic fall in sales of consumer goods. In Europe families have been saving money too but the effect has been different. Daniel Gros, Director of Centre for European Policy Studies said: “There is a fundamental misunderstanding, in the sense that in the USA households are saving more so the government must spend more so that demand doesn’t fall down to much. In Europe households are actually not saving much more, so in Europe there is not so much a big need for a fiscal stimulus. And probably in most of continental Europe a fiscal stimulus would not have a big impact because if the government gives households more money probably they are going to save it.” In countries like Germany which are very dependent on exports, unemployment has soared. But Berlin believes financial regulation is the way forward rather than pouring billions into what could effectively be a bottomless pit. Financier Etienne Davignon, vice-chairman Suez Tractabe said: “ The problem of the United States is very different from Europe’s. Why? “Because Europe, which runs welfare states has to face the reality of providing for social security, protecting the poor, education and such like The United States doesn’t run a welfare state sytem like ours. In order to introduce it they must find the means. Therefore we are in a situation where objectives and budgets are very different.”