Financial Markets Wait Nervously as Washington Negotiates Bailout | Voice of America - English
Europe waits nervously as lawmakers in Washington continue to wrangle over a $700 billion rescue package for U.S. financial institutions. Talks between the Bush administration and congressional negotiators continue Friday after reportedly contentious discussions a day earlier ended with no agreement. VOA's Sonja Pace reports from London on the European reaction to the ongoing financial crisis.
Speaking inWashington Friday morning, President Bush promised that a financialrescue package would be passed, warning there is no choice but to act. Meanwhile, for financial markets in Europe and around the world, it's a nervous wait-and-see. EconomistMargaret Bray of the London School of Economics says there is goodreason to be nervous. "This is a situation where panic feeds uponitself," she said. "The financial markets are very jittery and untilsome sort of more normal action comes back to these markets it doesmake it very difficult for important aspects of the economy tofunction." And that normal economic activity affects not justthe movers and shakers in London's financial district or on WallStreet, but small businesses and average workers, as Bray explains. "You'rerunning a business, you need to borrow to meet your payroll this monthbecause you're not going to get in money for what you're selling foranother month - you  want to have a loan to put your daughter throughcollege - you want to buy a house - it affects all these things andthose have a knock-on effect for people's jobs," she said. Tokeep economic activity flowing, central banks around the world havecoordinated efforts to inject funds into the banking system. MajorEuropean central banks pumped billions of dollars into the system onFriday. Margaret Bray says that is a necessary and effective measure. "It'sbeing done because the banks are unwilling to lend to each other," shesaid. "They don't trust each other and because of that it's hard forthem to lend to us. It makes their depositors anxious also and thecentral bank injection of funds is about lending short-term to thebanks to oil the wheels of the financial system, to keep these fromseizing up altogether." Bray says it is important to have alarger financial rescue package such as the one under discussion inWashington. But, she says the outlines have thus far been very vagueand the success of any such package will depend on the details.