No end in sight for financial crisis
The United States looks almost certainly set to go into recession and the rest of the world will suffer the consequences, says Dutch Central Bank President Nout Wellink. *By Wendy Braanker.
The financial crisis is not over by a long chalk. The United States looks almost certainly set to go into recession and the rest of the world will suffer the consequences says Dutch Central Bank President Nout Wellink.
[Photo: Dutch Central Bank president Nout Wellink]
Rising inflation and an expensive euro are the global results of the mortgage crisis in the US. The Americans are in trouble, but Europe’s economies are also facing difficulties. The International Monetary Fund is even going as far as to talk about the biggest financial crisis since the Great Depression of the 1930s. Not only banks in the US but also European financial institutions are feeling the pain. Mr Wellink believes an end to the problems is not in sight:
“The economies of a few European countries are being affected by housing market problems. But the European housing market as a whole is not as problematic as that of the US. And the European economy is much more robust because of the numerous structural reforms introduced over recent years.”
The International Monetary Fund reckons there is about a 25-percent chance of a global economic crisis resulting from the problems in the US loans market. A crisis will mean less trade and that will hit European economies which are already less competitive because of the expensive euro. The value of the euro has almost doubled against the US dollar in just a few years, Mr Wellink again:
“The growth in world trade is the deciding factor in whether your exports remain stable. But if growth decreases - and it’s under pressure at the moment – then the strong euro will become more noticeable. And that could easily cause us more trouble.”
*RNW translation (mw)
7 April 2008
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[Copyright Radio Netherlands]