London
26 September 2008
Europe waits nervously as lawmakers in Washington continue to wrangle
over a $700 billion rescue package for U.S. financial institutions.
Talks between the Bush administration and congressional negotiators
continue Friday after reportedly contentious discussions a day earlier
ended with no agreement. VOA's Sonja Pace reports from London on the
European reaction to the ongoing financial crisis.
Speaking in
Washington Friday morning, President Bush promised that a financial
rescue package would be passed, warning there is no choice but to act.
Meanwhile, for financial markets in Europe and around the world, it's a nervous wait-and-see.
Economist
Margaret Bray of the London School of Economics says there is good
reason to be nervous. "This is a situation where panic feeds upon
itself," she said. "The financial markets are very jittery and until
some sort of more normal action comes back to these markets it does
make it very difficult for important aspects of the economy to
function."
And that normal economic activity affects not just
the movers and shakers in London's financial district or on Wall
Street, but small businesses and average workers, as Bray explains.
"You're
running a business, you need to borrow to meet your payroll this month
because you're not going to get in money for what you're selling for
another month - you want to have a loan to put your daughter through
college - you want to buy a house - it affects all these things and
those have a knock-on effect for people's jobs," she said.
To
keep economic activity flowing, central banks around the world have
coordinated efforts to inject funds into the banking system. Major
European central banks pumped billions of dollars into the system on
Friday. Margaret Bray says that is a necessary and effective measure.
"It's
being done because the banks are unwilling to lend to each other," she
said. "They don't trust each other and because of that it's hard for
them to lend to us. It makes their depositors anxious also and the
central bank injection of funds is about lending short-term to the
banks to oil the wheels of the financial system, to keep these from
seizing up altogether."
Bray says it is important to have a
larger financial rescue package such as the one under discussion in
Washington. But, she says the outlines have thus far been very vague
and the success of any such package will depend on the details.