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Europe divided over tackling crisis

PARIS: After the record losses registered by Wall Street on Thursday, followed by stock markets across Asia, it was the turn of European bourses to come tumbling down. The Frankfurt and Paris exchanges at mid-morning fell by almost ten per cent before rallying somewhat, setting off fears that the “capitulation” benchmark had been crossed.

In Paris, the CAC 40 index began the day at minus 6.3 per cent, then falling to minus 10.2 per cent in les than two minutes before recovering somewhat. Stocks on the Frankfurt and London exchanges dropped equally spectacularly.

The DAX in Frankfurt opened at minus 5.99 per cent, then quickly fell to minus 10 per cent, whereas London, which opened almost unchanged, went down by 610.20 points, falling below the 4000-mark for the first time since 2002.

The bourses rallied somewhat but at 1500 hours local time, panic selling hit the markets again with Paris falling to minus 9.12 per cent. The FTSE lost 7.06 per cent as the British pound sterling registered its lowest score against the U.S. dollar since 2003. In Milan, Madrid and Brussels, the same story of woe and panic selling was being reported while Vienna was obliged to suspend trading after stocks plummeted.

The European Central Bank announced that it would make available credit to the extent of $100 billion repayable in four days in a frantic bid to bring calm to panic-struck markets. A similar offer on Thursday failed to have the desired effect.

The market crash in Europe will put additional pressure on G7 leaders who begin a meeting in Washington late Friday, to find common ground and propose solutions at a global level. Despite several meetings, the Europeans have been sharply divided on the best way to deal with the crisis and the EU governments have been acting individually, making piecemeal, incremental announcements in a futile bid to stem the panic. The contamination has now spread from banks to engulf the insurance sector. Insurers followed banks as some of the worst underperformers, under pressure after the second largest U.S. insurer, Prudential Financial warned on quarterly profits on Thursday, sending its shares down by more than 23 per cent. There was an across-the-board tumble in stock prices with the defence, oil, and manufacturing sectors also hit particularly hard.

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