The fallout from the financial crisis is affecting economies around the world. By Sean O'Grady Tuesday, 21 October 2008 Latin America The sovereign debt crises of the 1980s, when nations such as Mexico and Argentina triggered a world crisis by defaulting on their debts, are not about to be repeated. These days South America seems healthier than North America: Brazil is the regional superpower, and her economy and banking systems seem in good shape. Even so, the Washington-based Inter-American Development Bank, the Bogota-based Latin American Reserves Fund and the Caracas-based AndeanDevelopment Corporation pledged $9.3bn (£5.4bn) in emergency loans last week to ease regional cash-supply problems. France The French government said last night that it will inject a total of €10.5bn (£8.2bn) into the country's six largest banks by the end of the year to help counter the effects of the global financial crisis. The finance minister, Christine Lagarde, said the capital injection was part of the government's €360bn rescue plan aimed at unblocking credit markets and ensuring the nation's banks do not collapse. Iceland Iceland's Industry minister says that the IMF is "very close" to completing a plan to rescue the country's stricken economy, with the possibility of additional funds from other Nordic nations, Japan and Russia. A sum of $6bn has been mentioned. Glitnir, Landsbanki and Kaupthing banks collapsed recently with debts of $61bn – 12 times the size of the Icelandic economy. Russia Even the oligarchs are feeling the pinch. Oleg Deripaska, Russia's richest man, and one of the wealthiest in the world, is seeking $2bn to part refinance a $4.5bn loan from Western banks. Set against his fortune, estimated at $28bn, it may not seem much, but if Mr Deripaska and figures such as Mikhail Fridman have to turn to Vladimir Putin for help, the long reign of the oligarchs may be compromised. Mr Putin came to power in 2000 vowing to destroy Russia's oligarchs "as a class". Among many other interests Mr Deripaska controls the world's largest aluminium supplier. Mr Putin has pledged some $50 to lend to cash-strapped companies. Ten years ago, ironically, it was the oligarchs who were lending the Russian government money as it defaulted don its foreign debts. More than $363 billion of Russian corporate and bank debt is due to be repaid by July 2009, a third to foreign banks. Ukraine An IMF team is in Kiev discussing terms for $14bn of aid to stabilise the financial system and help plug a gaping trade deficit. Ukraine plans to nationalise banks in trouble "to save the banking system". South Korea Having scarcely revered from the east Asian currency crisis of 1997, South Korea's government has had to provide up to $100bn to secure her banks' maturing foreign currency debt and another $30bn in other funding. The Bank of Korea described growth prospects yesterday as "low", at 5 per cent for this year. Seoul's main share index rose yesterday, recovering from an earlier three-year low. But foreign sellers continue to head for the exits. They sold a net 347.1 billion ($265.2m) won in stocks, adding to the 1.56 trillion won they dumped in the three previous sessions. United States The $750bn may not be enough. Ben Bernanke, the chair of the US Federal Reserve, said yesterday that another wave of significant government spending may be needed to avoid a sharper, deeper slowdown than seemed likely. It was the first time Mr Bernanke had explicitly endorsed a second stimulus package. Earlier this year the Bush administration gave about $100bn in tax rebates direct to consumers. United Arab Emirates Some $54bn of foreign funds have reportedly fled the UAE, and in particular the fledgling Dubai international finance centre, in recent weeks. Dubai's high levels of debt were no cause of concern when oil was at $14 7a barrel as recently as July; as it sinks closer to $70 now foreign investors may be feeling more nervous. However, there are signs that the Emirates may be more united than the EU nations when it comes to helping each other. The IMF said that the even wealthier Abu Dhabi will help Dubai pay its debts if the second-largest sheikhdom in the United Arab Emirates asks for help. Abu Dhabi is the largest and richest of the seven sheikdoms that make up the UAE. Dubai may need support to finance a surge in borrowing that paid for its investments and economic diversification plans, Moody's Investors Service has suggested. India Previously relatively untroubled by the crisis, India's central bank announced yesterday an emergency cut in interest rates of a full percentage point. The move was a response to increasingly unsettled stock markets, with fears that a flight of foreign capital may destabilise India's impressive recent run of economic growth. China Few advanced economies would be disappointed by the nine per cent annualised growth reported by China in the last quarter, but it comes against a recent performance of 12 per cent plus, and, more recently, more than 10 per cent. The slide into single-figures growth, which is predicted by the IMF to extend into next year, represents proof that the world can no longer depend on China to pull it out of a global recession. Australia Just as she was a big winner from the commodities boom, so now resource-rich Australia may find her economic growth and living standards dented by rapidly declining prices for copper, coal, bauxite and the other raw materials of China and India's industrial revolutions. The Federal government has already announced an Aus$10bn (£4bn) stimulus package. Sweden Having pioneered the modern science of bank rescues 15 years ago, the Swedish state is again being called upon, with a 1.5 trillion krona plan (£118bn) of credit guarantees and a bailout fund. Estonia, Latvia, Lithuania The IMF has already warned that these states are particularly vulnerable to a slowdown because of the size and scale of their property bubbles. Hungary The IMF is all but certain to help Hungary's ailing economy, over reliant on foreign currency borrowings to fund growth. Serbia Politically as well as economically unstable, Serbia is also said to be close to receiving IMF aid. The IMF has said it has up to $200bn in emergency funds available, and suggested that 24 nations are likely to receive assistance. Switzerland Last week Switzerland announced a near $60bn bailout package for the world's largest investment fund manager, UBS, in charge of $2trn in assets.The spreading global storm
Tuesday, 21 October 2008
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