Iceland on brink of bankruptcy
Sweden lends $701m to bail out the country; US, Europe cut interest
rates; IMF says crisis to be lengthy; Indian stocks tumble
Star Re****t
As the domino effect of the financial meltdown on Wall Street sends
shock waves through Europe with Iceland teetering on the brink of
bankruptcy
for the first time since the advent of economic globalisation, governments
rushed to salvage whatever they could yesterday.
In an extraordinary move that reflects the gravity of the financial
turmoil, the world's central banks yesterday announced coordinated
interest
rate cuts as they try to restore confidence in the economy.
Meanwhile, following the footsteps of the US, Britain also announced
a
three-part multibillion-dollar bailout for its beleaguered banks
yesterday,
and Spain moved to mount a separate rescue of its own banking sector.
As a part of the bailout package, Britain's eight main banks will be
part-nationalised.
The Federal Reserve Bank of US reduced its key rate from 2 percent
to
1.5 percent.
In Europe, the Bank of England cut its rate by half a point to 4.5
percent, while the European Central Bank sliced its rate to 3.75 percent.
Other central banks also taking part in the interest rate cut
include
the banks of Canada, Sweden, and Switzerland.
China also cut its key interest rates yesterday for a second time in
less than one month to stimulate slowing economic growth amid the global
credit crisis, while Indian stocks fell to a two-year low amid fears that
the credit crunch could lead to a global recession.
Sveriges Riksbank, and the Swiss National Bank also reduced their
respective policy interest rates.
In the meantime, Sweden's central bank said it will loan up to five
billion kronor (514 million euros or 701 million dollars) to the Swedish
branch of Iceland's biggest bank Kaupthing to provide liquidity.
The central bank, Riksbank, also announced that Kaupthing Sweden was
up for sale.
Russia also agreed to negotiate a four billion euro (5.4 billion
dollar) emergency loan to help Iceland fight against national bankruptcy.
The world economy is entering a major downturn in the biggest
financial crisis since the 1930s, said the International Monetary Fund
(IMF).
In a hard-hitting re****t, IMF warned the global economy is facing
its
most dangerous crisis for 70 years.
World economic growth will slow substantially this year, and only
pick
up modestly later in 2009, it said.
At the same time the impact of surging oil and food prices had led
to
rates of inflation not seen for 10 years, it warned.
It warned the challenge for governments will be to stabilise
economies
while keeping a lid on inflation.
In its latest bi-annual World Economic Outlook re****t, IMF said
global
economic growth will slow to 3.9 percent this year and then to just 3
percent in 2009 -- its lowest level since 2002.
Growth in emerging and developing countries will still be 6.9
percent
this year, and 6.1 percent in 2009 -- while growth in China will still be
an
impressive 9.3 percent next year -- IMF forecast.
It urged global policy makers to coordinate a response to the
spreading financial crisis.
US President George W Bush yesterday discussed the global economic
meltdown with the leaders of Britain, France, and Italy, seeking a common
strategy ahead of the scheduled meeting of the finance ministers from the
Group of Seven rich democracies on Friday in Wa****ngton.
(Sources: AFP, AP, The New York Times, The Wall Street Journal, BBC
Online)
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