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World is watching as U.S. responds to financial crisis

In a global economy, the crisis on Wall Street is felt on the streets of London, Paris and Tokyo. And what political leaders attempt to do in Washington to stop the bleeding is watched closely around the world.

As the Associated Press reported last week from London:

“The financial earthquake that began in the U.S. subprime housing market has shaken economies across Europe. Ireland has been among the hardest hit. An economy that boomed by wooing hundreds of American companies with low corporate taxes is now on the brink of recession. … But even France — whose strong state involvement in the economy offers a measure of insulation — is not immune to the gloom. The finance minister has warned that mortgages will be tougher to come by as banks tighten lending. The media are feeding consumer jitters with stories about families struggling to get credit and French bankers in London fearing for their jobs.”

Alistair Darling, the British Chancellor of the Exchequer, warned of bumps ahead, the Telegraph reported Monday.

“In his speech to the Labour Party conference, Mr Darling said it was now necessary to “let borrowing rise to support the economy.” Although warning that “bumps” lay ahead for the economy he insisted that “Britain is strong.”

Mark Rice-Oxley of The Christian Science Monitor reports from London that “talk of Europe or Asia marching along ‘decoupled’ from the US economy is now gone. No sooner had America’s fourth-largest investment bank filed for bankruptcy on Monday (Sept. 15) than hundreds of suddenly jobless Lehman Brothers staff spilled onto the streets of London. It was a tangible sign that global markets and economies are still intimately connected. Banks, insurance companies, pension funds, and mortgage companies from Tokyo to the City are closely tracking the handling of the US financial crisis. While exposure to the root of the problem — toxic securities derived from US subprime home loans — may be lower, financial systems elsewhere are feeling the same squeeze.”

While responding favorably to some aspects of the Treasury’s $700 billion bailout plan, the Economist is cautious about its immediate impact in the United States and elsewhere:

“It could be some time before the Treasury is able to buy mortgages en masse, and longer still before that starts to affect the broader financial system and economy. In the meantime, the crisis could claim other victims.”

And National Public Radio’s Sylvia Poggioli reports that some people in Europe contend that “greater regulation and more conservative fiscal policies” have minimized the Wall Street crisis on the continent.

Here is a sampling of other comments on how the fiscal crisis is affecting other countries and how analysts abroad view the scene on Wall Street:

New Europe, the European Weekly: “US plans mammoth bail-out to contain financial crisis”

New Europe: “Trying to pull the plug on panic, but it hurts”

The Telegraph: “Financial crisis: Markets must be free — they give us the power to make choices”

The Economist: “Bold ideas for solving America’s financial mess”

The Guardian: “Jitters over rescue plan send oil price surging”

Nieman Watchdog: “International media are critical of McCain”

France24: “Last-ditch efforts to save Lehman brothers before markets open”

BBC: “US bail-out plan provokes doubts”

BBC: “Soros expects more bank woes, a video interview with George Soros”

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Comments (1)

  1. Submitted by Twiggs on 09/23/2008 - 11:47 am.

    Stone is correct the interconnectedness of the global economy is often misunderstood by our parochial politicians. One should look to J Diamond’s book “Collapse” as he studies failing cultures .Lack of recognition of these relationships is deadly.

    Where are the leaders in this society …masquerading as demagogues unfortunately?

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