World View

There is widespread panic in the global financial system despite the US President George W. Bush's bailout plan of $700b to shore up the American economy. Worldwide, central banks have joined hands to cut down on interest rates to soften the blow of plummeting stock markets that has manifested in a near-breakdown of lending among banks and a credit crunch. It has led to a snowballing effect on the markets in Europe, the Arab world and Asia. The bailout deal and the impending economic woes were also addressed by Barack Obama and John McCain at their debate last Tuesday night as the crisis will definitely effect their campaign and prospects in the November election. These events were contemplated, analysed and commented on. We present here excerpts of editorials from the regional and the international press.

Creating a panic

In the Arab world, billions were wiped out from the financial markets thereby creating a panic among investors across the region, especially in the Gulf Cooperation Council states - Saudi Arabia, the UAE, Oman, Qatar, Bahrain and Kuwait. Lebanon's The Daily Star recommended that Arab leaders should put their heads together to weather the financial storm. "The mere potential of a crisis of such large proportions warrants a systemic response, not just from individual governments, but rather through coordinated policies. That's why it is so important for the Arab League, especially its economic division, to be proactive on this issue. The league's secretary general, Amr Mousa, would do well to call for a meeting of the region's finance ministers and other policymakers so that strategies can be put in place before - not after - disaster strikes," it said.

Commenting on the global impact of the financial crisis, and more so on US and Europe, Washington Post said that as the financial instability crosses the Atlantic, the need for policy coordination grows.

"A new and troubling wrinkle is that the pending downturn looks like it is going global. In Europe, where governments have had to rush to the rescue of several failed banks in recent days, stock markets are also tanking. Several countries, fearing bank runs, have felt compelled to guarantee deposits. As European officials and media say, this represents transatlantic 'contagion' - the spread of financial instability originating in sour US mortgages and mortgage-backed securities. But we are also witnessing the consequences of characteristically European vulnerabilities: One of these is the continent's relatively higher dependence on bank financing of corporations," it commented.

It also suggested that in a time of crisis like this, "this is no time for the multilateral Europeans to go nationalist. They need to cooperate with one another, and with the United States, lest a scary situation become even scarier".

As Asia, including India, too felt the impact of the economic tornado, The Times of India stated that export-driven China and commodity-driven Brazil are bound to take greater hits as demands for exports drop and commodity prices plunge.

"In that sense, India is better placed given its appreciable domestic consumption. Yet, there can be no room for complacency. This is as much a wake-up call for us as for any other country. We need a multi-pronged plan to ride out this crisis and prepare ourselves for future dips and dives. FIIs are bound to pull out money now as credit freezes and that will hurt us," it cautioned.

In Britain, the Labour government came out with the Treasury's Darling plan to shore up British banks to tackle the two problems at the heart of the credit crisis - lack of capital and lack of liquidity. Commenting on the plan, The Times said that the government has formulated an intelligent plan to shore up the banks. But those who presided over recklessness should not expect to keep their jobs. Moreover, it said that it is an intelligent and measured response to the financial crisis. "It will provide much-needed new capital, while rightly placing the greatest burdens on those banks that have been the most irresponsible. It limits the eventual cost to taxpayers by avoiding nationalisation - and in doing so preserves the City's prospects as an international financial centre. This may not end the gloom, but it should end the panic," it added.

While lauding the bailout package, Arab News said: "Such is the panic that has gripped Americans, in no small measure thanks to the dire disaster warnings of President George W. Bush himself, many are extremely grateful that Congress has finally passed the rescue package to bail out US banks by buying their "toxic loans" at a likely cost to the US taxpayer of up to $700 billion.

"Main Street resents the bailout of Wall Street but there is a general acceptance, albeit through gritted teeth, that if the massive financial rescue had not gone ahead, everyone would have suffered from an economic collapse and this is almost certainly true," it remarked.

In a bid to boost investors' confidence, The Christian Science Monitor stated that investors need renewed faith that US mortgages no longer come with the toxin that they were sold under government pressure to unworthy buyers. New attempts to keep risky buyers in their homes will only prolong the crisis and prevent house prices from stabilising.

It suggested that to reduce financial complexity, "more mortgages need to remain locally owned, with banks that know their customers. Human beings, not computer models, need to track a loan's worth.