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Financial crisis World round-up

A look at the regions of the world most affected by the financial crisis, and what governments are doing to try to alleviate the financial turmoil.

JOINT ACTION

The International Monetary Fund said it was ready to lend to countries hit by the credit crunch, using an emergency funding mechanism first used in the 1990s Asian financial crisis.

The US Federal Reserve, the European Central Bank, the Bank of England, and the central banks of Canada, Sweden and Switzerland took the unprecedented step on 8 October of co-ordinating a half-point cut in interest rates in an effort to ease the credit crunch.

AMERICAS

MEXICO: President Felipe Calderon has proposed to spend $4.4bn on infrastructure and energy projects to boost the economy. The central bank has also begun to auction off $2.5bn in reserves to prop up the falling peso.

US: Treasury Secretary Henry Paulson has warned that some banks will fail despite the $700bn rescue package to shore up the financial system.

He said the financial crisis would not end soon and called for the plan’s swift implementation.

Mr Paulson wants to use the money to buy up many of the dubious mortgage investments on Wall Street.

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ASIA-PACIFIC

AUSTRALIA: Australia’s central bank has cut its key interest rate from 7% to 6% – a much bigger-than-expected reduction. Observers had only expected a half-point cut as inflation is currently above target.

CHINA: China has also joined the interest rate offensive, cutting rates by 0.27 percentage points.

JAPAN: Prime Minister Taro Aso said he would call an emergency summit of the G8 if finance ministers meeting in Washington did not reach agreement to take action on the credit crisis.

He has said more action would need to be taken to boost the country’s flagging economy, even after the lower house approved a 1.8 trillion yen ($18bn) stimulus plan and the Bank of Japan put 4.5 trillion yen ($45.5 billion) into the banking system.

SOUTH KOREA, HONG KONG, TAIWAN: The central banks of South Korea, Hong Kong and Taiwan have joined the growing number of countries to cut their interest rates.

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EUROPE

AUSTRIA: Austria officially announced a guarantee for all personal bank savings, retroactive to 1 October.

BELGIUM: The Belgian government has agreed to guarantee bank deposits of up to 100,000 euros ($136,000) – an increase of 80,000 euros.

The country’s largest banking group, Fortis, needed the intervention of the Belgian and Dutch governments and the sale of some of its assets to French giant BNP Paribas, to stay alive after getting into difficulty over the purchase of Dutch bank ABN Amro.

DENMARK: The Danish parliament has approved a government-backed crisis plan which gives an unlimited guarantee to savings deposits.

GERMANY: The country’s second-biggest commercial property lender, Hypo Real Estate, was threatened with collapse last week after incurring large amounts of bad debt. It survived after a government-sponsored rescue was arranged.

GREECE: The Greek government said on 3 October it would fully guarantee all bank deposits of citizens, but an official added that this was a “political commitment” and the banking system was not at risk.

HUNGARY: The Hungarian government has proposed raising the guarantee on bank deposits from the current 6m to 13m forints ($67,000) following talks with the president of the Hungarian central bank.

ICELAND: The authorities have taken over the country’s biggest bank, Kaupthing, the third such takeover in recent days. Iceland’s financial regulator said the move was made to protect domestic deposits. Two other largest banks, Landsbanki and Glitni, had earlier been nationalised.

Iceland’s parliament has passed emergency legislation giving the government wide-ranging powers to dictate banks’ operations.

The government has agreed measures allowing the banks to sell off some foreign assets to help shore up the financial system.

Negotiations are under way with Russia for a big loan to support the country’s banking system. Moscow has offered more than $5bn in emergency loans.

IRELAND: Ireland was the first government to come to the rescue of its citizens’ savings, promising on 30 September to guarantee all deposits, bonds and debts in its six main banks for two years.

The move initially prompted consternation among some European partners, but several countries have since followed suit.

ITALY: The Italian Prime Minister, Silvio Berlusconi, said the government was prepared to buy stakes in failing banks while waiving voting rights in an effort to guarantee stability.

NETHERLANDS: The Dutch government has said it will make 20bn euros ($27bn) available to protect the financial sector from “extreme shocks” during the credit crisis. The Netherlands has also trebled the amount of savers’ deposits it will protect to 100,000 euros ($136,776).

RUSSIA: The parliament’s lower house, the State Duma, has passed a law giving the state-run Bank for Development and Foreign Economic Activities 1.3 trillion roubles ($50bn) to pay off or service Russian banks’ foreign loans.

It comes after President Dmitry Medvedev announced 950m roubles ($36.4bn) of long-term help for banks at an emergency Kremlin meeting on 7 October.

Russia’s two leading stock exchanges have suspended trading several times after suffering massive falls in value.

SPAIN: Spanish Prime Minister Jose Luis Rodriguez Zapatero on 7 October increased bank deposit guarantees to 100,000 euros ($136,000) from the current 20,000 euros. Spain has been calling for a joint European initiative to tackle the world financial crisis.

UK: The government has announced a £50bn ($88bn) package to prop up eight of the largest banks and building societies. In return, the government would receive shares in those institutions. A further £450bn would be made available to provide liquidity to the money markets and loan guarantees for banks.

The announcement came after banking shares plunged on 7 October and the British Chambers of Commerce (BCC) warned that Britain was already in a recession which could see unemployment rise by 350,000 by next year.

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MIDDLE EAST

ARAB STATES: Share prices have dropped precipitously this year, amid fears of weakness in Dubai’s property boom and exposure to global markets. However, economists expect growth to continue at a moderate rate as the region’s oil wealth cushions the worst of the financial turmoil.

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SOUTH ASIA

INDIA: The central bank has moved to inject 600bn rupees ($12.2bn) into the money markets after sharp falls in Mumbai’s stock exchange and the plunge of the rupee to an all-time low. Analysts say that India’s inflation rate of 12% limits the central bank’s scope to cut interest rates.

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October 11, 2008 - Posted by | Uncategorized

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