Fear of financial icebergs grows

No-one is immune from the banking crisis, the fall in stock prices and the political stalemate in Washington. But European countries are all going their own way.

A financial crisis cannot be stage-managed. At most it can be averted, and even that is a hellish task for politicians, policy-makers and bank directors who for more than 200 years have been taught the mantra free market, freedom of choice and free citizens who take responsibility for themselves.

National governments are suddenly drawing the financial world towards them like fully-fledged capitalists. “The socialists are marching into Wall Street”, said Dutch finance minister Wouter Bos at a meeting last week.

Now he himself has become major shareholder in the Dutch division of financial services group Fortis for the sum of four billion euros.

There have been talks between central banks and their finance ministers about rescuing banks for at least 35 years, but in practice little has been tried and tested. International political discussions about the management and eventual supervision of global money and capital flows clash with the national interest.

Freedom to operate

The participants in this global investment stream can only have the freedom to operate as they will if they do their jobs properly, at all levels. And this is where they have failed.

Nobody has kept a proper eye on the breathtaking financial constructions which have been thought up and implemented and are now bobbing around in the financial waters like an iceberg. The banks are paralysed by their fear of what lies underneath. They are asking themselves: which one of us is the next Titanic?

This fear of icebergs begs the question about what the rescue operations will actually deliver. Are the ministers of finance in the US and in Europe busy rearranging the deck chairs or are they managing to steer around the icebergs with a steady hand?

Rash takeovers

National treasuries are now being opened to comfort savers in the western world. Tax-payers are paying for the excesses of others - from rash takeovers like Fortis' wish to buy the bigger ABN Amro to the reckless financial behaviour of German regional banks and numerous US institutions.

On Sunday night, the governments of Belgium, the Netherlands and Luxembourg rescued the Dutch-Belgian company Fortis with more than 11 billion euros. On Tuesday morning it emerged that the Belgians will support French-Belgian Dexia in a second multi-billion euro rescue. And Dutch finance minister Wouter Bos promised last night that he would rescue other Dutch banks if the need arose.

Spectacular falls

But will this convince savers that their money is safe in the bank? For the financial and political fire-fighters on two continents, the European banking crisis only represents one-third of their concerns. The two others are the spectacular falls on Wall Street last night and the political stalemate in Washington about the rescue plan for the US banking sector.

In the meantime, the Americans have done almost everything they should do: save banks, nationalise their biggest insurance company, nationalise the two biggest mortgage lenders, set up an emergency fund for investment funds and produce a 700 billion dollar rescue plan. But it is not helping. Not yet.

Financial shocks

No-one is immune to the effect of these three political shock waves which are coursing the globe. Financial shocks like these are responsible for uncertainty, in which consumers cut back on spending and companies reign in their expansion plans.

It is clear that despite the first rehearsal with a Dutch-Belgian cross-border financial crisis, every country in Europe is going its own way. In Europe, the banking turmoil has been marked by rescue operations in Belgium, the Netherlands, Britain, Germany and Denmark.

That means other countries will follow sooner or later. In times of financial trouble, only the best is good enough to soothe the worries of the man in the street. And the best, at least the one that boosts confidence the most, is a government guarantee.

And what is Europe doing? The European Commission has always been firm in its criticism of government efforts to save national industrial champions. But under pressure everything becomes more fluid.