World financial crisis

Stocks continue to fall despite US bailout announcement

Article published on the 2008-09-29 Latest update 2008-09-29 15:54 TU

(Photo: Reuters)

Global markets fell on Monday despite Sunday’s announcement that the US economic bailout deal had been finalised. The US House of Representatives began debating the package Monday. The global financial crisis prompted two new state rescues of major European banks and European and Asian stocks tumbled.

Although the debate in Congress is heated, correspondent Dick Rossé believes the package will be passed.

"I can’t see failure," he told RFI. "What I can see is a last-minute whistleblow by somebody, saying ‘we’ve got to address this’ and, if it’s a quick fix, they’ll go make that fix."

In Paris, the Cac-40 stocks index dropped five per cent on Monday, while in Germany the banking shares were in freefall, pushing the European Central Bank (ECB) to announce 120 billion euros in special loans to ease banks’ cashflow.

These developments followed this morning’s announcement that the Belgian, Dutch and Luxembourg governments together rescued Fortis Bank with an 11.2 billon euro bailout. The state interests in the bank, however, are only temporary, Belgium’s finance minister Didier Reynders said in a radio interview Monday.

Reynders assured European officials that the governments would sell their interests “as soon as possible,” but they are not interested “in selling off this asset at a cut price”.

In Britain, the government announced a full nationalisation of mortgage lender Bradford & Bingley’s mortgage section, while its savings assets will be sold to Spanish bank Santander.

“What you’re seeing is the government taking quick, decisive action. We’re standing behind the system to stabilise it, because to let Bradford & Bingley go down would have destabilised the entire system,” Finance Minister Alistair Darling said.

In Asia, Japan’s new Prime Minister Taro Aso took action to prevent Asia’s largest economy from tumbling into recession.

In his first speech to parliament since taking office last week, he promised new tax cuts on Monday to be passed in an emergency budget, even as he prepared to dissolve parliament and head into fresh elections.

The income tax cuts, he explained, will boost slumping consumer spending and avoid a looming recession.