The German Chancellor looks unimpressed by the growing unease in European markets
The New York Times and the Wall Street Journal are both reporting today on the effects of the American credit crisis on European soil. It seems as though Monopoly Europe has just been released. More on the flip side.
The Journal story does an excellent job of summarizing what individual countries like Ireland, Germany and the UK are doing to shore up what is seen as a massive gap in confidence – and rightly so. Many of the banks lack the comprehensive guarantees afforded by the United State’s FDIC, so they have either promised to guarantee deposits or raise the amount they are willing to guarantee (although those levels remain far below the $250,000 currently being covered by the US government. Britain raised guarantees up to $90,000 while Germany will insure the first $27,000).
Both the Journal and the Times have done a good job explaining the added complexities inherent in the European situation. Although sixteen countries have adopted the Euro, there exists no governmental or regulatory body to policy and monitor the currency that would have the same power as the United States Federal Bank. There is a European Central Bank (ECB), but it remains politically weak in its ability to convince member banks to lend to each other “beyond periods of a few days.”
Sylvester Eijffinger, a member of the monetary expert panel advising the European parliament, was interviewed by the Times as saying, “First we had economic integration, then we had monetary integration. But we never developed the parallel political and regulatory integration that would allow us to face a crisis like the one we are facing today.”
Past & Prologue will be on watch as these and other stories progress.
