After a raft of unprecendented rescue measures across Europe and the US, the focus in the world of finance has switched to building up confidence.
Speaking on French television, European Central Bank President Jean Claude Trichet said keeping the faith was the key:
“We have just taken the significant step of lowering interest rates on both continents, in Europe and the US. Its a big step to take, and its success should be measured in the long-term, not against the short-term fluctuations of the markets.”
The markets in Europe, though, remain extremely volatile. Overall European shares were down six and a half per cent yesterday, with Germany’s DAX posting a six percent drop. Chancellor Angela Merkel urged investors not to panic:
“I think the orchestrated measures of the central banks are a sign that indicates the economic strengthening which is helpful from my point of view. We need to do everything in order to keep the real economy as unaffected by the financial crisis as possible.”
In Italy, Prime Minister Silvio Berlusconi’s government last night approved a cash-for-shares deal for banks, aimed at keeping them in business but without full nationalisation. Berlusconi insisted the idea was to calm savers:
“Nobody should be worried, there is nothing to fear. No Italian banks will fail and no savers have to go to their bank to rescue their money because I don’t believe that mattresses are any safer than the Italian banking system.”
Experts say the real sign of recovery will come when banks begin to lend money to each other again, and even show a profit.
But it could be many months before that happens – and until then, the nail-biting game of wait-and-see must, by definition, continue.