Despite assurances from European leaders that their financial systems are stable, Europe may still need a comprehensive rescue plan, similar to the $700 billion package being voted on by the U.S. Congress, according to Angel Gurria, head of the Organisation for Economic Co-operation and Development (OECD).
In a speech before the Parliamentary Assembly of the Council of Europe on the prospects for the global economy, Gurria stated: "We have already seen the first cases of rescuing struggling European banks in the United Kingdom, Belgium, the Netherlands, and Germany." Considering the exposure of European financial institutions, we may need to start thinking about a systemic plan for Europe if things do not improve on the other side of the Atlantic. A fragmented approach may not achieve the desired result in Europe either." So far, European countries have dealt with cases of struggling financial institutions separately and have not resorted to systemic measures, as evidenced by the examples of the Belgian bank Fortis and the Franco-Belgian financial group Dexia.
Additionally, the European Central Bank (ECB) has continued to inject funds into money markets to prevent a decrease in lending activity. The OECD head stated that major economies are facing several quarters of weak growth due to a slowdown in economic activity worldwide and the current financial crisis. Thus, the seven most developed economies in the G7 group are expected to record a growth rate of only 1.4 percent in 2008, compared to last year’s 2.2 percent. "We are facing the worst financial crisis since the Great Depression, and its consequences are already spreading beyond the financial sphere, worldwide," he said. "The financial system is the conveyor belt through which the economy functions. If it is partially blocked or paralyzed, as is the case now, the economy cannot function normally." (H)
