Brussels, 18/03/2008 (Agence Europe) - “We are, of course, concerned by the information we are receiving from the other side of the Atlantic. We hope the situation will return to something more normal as quickly as possible,” said the spokeswoman for Economic and Monetary Affairs Commissioner Joaquin Almunia on Tuesday 18 March. Such is the European Commission position on the wind of panic rattling financial markets in the United States, where analysts believe that the situation has moved from being one of crisis prevention to one of crisis management. Almunia's spokeswoman said that at the end of April the Commission would present its spring forecast for growth in Europe and its analysis of “clouds” hanging over this growth, such as the international financial crisis and increases in oil and food prices. She recalled that in its interim forecast at the end of February, the Commission predicted 2% growth in the EU. “2% is clearly far from the risk of recession,” Almunia said the previous day, addressing the Organisation for Economic Cooperation and Development (OECD), calling for a speeding up of structural reform in Europe to limit the effects of temporary slow-down. He acknowledged that the US economy was “perhaps even entering a recession”. European Commission President José Manuel Barroso, visiting Brazil this week, did not hide his concern: “We (Europeans) are concerned by the instability between the main international currencies,” he said, quoted by Spanish press agency EFE. On 17 March, the euro almost reached $1.6 before settling at $1.57.
Meeting in emergency session with US President George Bush, American monetary and financial authorities took action to prevent the collapse of the US financial system. The last gasp rescue - at a give-away price - of Wall Street's fifth largest investment bank, Bear Stearns, increased investors' mistrust with regard to financial institutions' exposure to the financial crisis resulting from the collapse of the US subprime market. The US Federal Reserve (the FED) is expected to further lower its rates to support the struggling American economy. In an article published in the Financial Times, Alan Greenspan, former Chairman of the FED, speaks of the crisis being probably the worst since the end of the Second World War. Daniel Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), and Angel Gurría, Secretary General of the OECD, say the financial crisis has become more serious and more globalised, and could worsen. They believe that governments must focus on maintaining the stability of the international financial system.
Since the start of the financial turbulence, the EU has speeded up work on financial stability. Last week, the European Council accepted the Ecofin Council interim report on work in progress in this area and repeated its call for increased market transparency (see EUROPE 9623 and 9612). In Slovenia in mid-April, European finance ministers will take stock of how well the financial stability roadmap, adopted in October of last year, is being implemented. They and the governors of national central banks will sign an extended, strengthened memorandum of understanding on financial crisis management following the bankruptcy of a bank operating across borders. (M.B.)