European governments, along with Washington, are increasingly having to intervene to prevent a domino-like spread of financial institution failures. Bradford and Bingley, Fortis, Dexia and Hypo Real Estate were just the latest as the contagion spreads throughout Europe.
Trader Oliver Roth in Frankfurt said: “Well the crisis is already in Europe, we have to say that, we have to admit that, but it’s like second impact, it’s not the troubled debt security positions, it’s the liquidity, and this is a problem.”
Nowhere in Europe has escaped the costly consequences. The region’s banks and insurers have so far suffered nearly 50 billion euros of charges and writedowns from the crisis.
Britain is among the hardest hit – top of the list are the nationalisations of Northern Rock and now Bradford and Bingley – but previously highly regarded blue-chip enterprises from all over the continent have been caught up in the credit strife.
The central banks hope by lending more they can unfreeze global markets gripped by the worst crisis since the Great Depression of the 1930s. Fear continue to permeate the financial world. As one top trader said: “Everyone’s asking: who’s next?”
The latest was US regional bank Wachovia. Citigroup is buying its banking operations. The deal was brokered by the US government and the Federal Reserve Chairman Ben Bernanke who said it would help bring financial stability.