European financial 'meltdown' causes alarm, blame

Rome
Just as in the United States, across Europe the global financial meltdown is dominating conversation. From the pope to the daily papers, alarm and the blame game seem to be spreading in roughly equal measure.

Headlines culled in the last 24 hours from major European papers say it all: “Financial markets in a freefall,” according to Corriere della Sera, Italy’s major daily; “Too little, too late?” asked Le Monde, the French paper of record, with regard to a decision of the European Central Bank to lower interest rates; “Get it right!” was the plea from the Suddeutsche Zeitung, a prominent German daily based in Munich, regarding various proposals for government interventions; and the Financial Times in England declared the current downturn “the worst financial crisis since the 1930s.”

height="250" width="166" Across Europe, stock markets at mid-week crumbled, generating the same fears as in the United States about inflation, pensions and job security. The British government announced a massive intervention to prop up its teetering banks, and Russia suspended trading on its major stock markets twice for fear the bottom would fall out.

Perhaps the most dramatic news so far has come from Iceland, where the national currency, the króna, has lost 40 percent of its value so far in 2008 – a decline exceeded only by the collapse of the Zimbabwean dollar – and where inflation is running at around 14 percent. In a dramatic nationally televised speech on Monday, Prime Minister Geir Haarde raised the specter of “national bankruptcy.”

Several newspapers have slugged Iceland as potentially “the first to go bankrupt,” a not-so-subtle suggestion that other European nations may not be far behind.

In general, European commentary has been almost unanimous in declaring the financial crisis of 2008 a catastrophe, one not likely to abate quickly. Beyond that, however, opinions about who’s responsible for the mess, and what to do about it, divide sharply.

Some commentators, such as an Oct. 5 editorial in Le Monde, lay the blame at the feet of irresponsible speculation and an exaggerated worship of the free market in the United States, suggesting that America is effectively dragging the rest of the world down with it.

That note has also been struck by a whole gaggle of European politicians. Peer Steinbrueck, the German finance minister, said the U.S. approach to finance “was as simplistic as it was dangerous.” French President Nicolas Sarkozy said it was a “mad idea” to think that markets could regulate themselves, and Italy’s finance minister, Giulio Tremonti, who has written a best-selling book about the perils of unregulated globalization, mused aloud over whether former Federal Reserve chair Alan Greenspan “is not, after [Osama] bin Laden, the man who hurt America the most.”

Other voices are floating more intra-European explanations, suggesting that the lack of common policies on matters such as bank regulation and lending practices has left Europe over-exposed to the financial storm. On Oct. 7, Corriere della Sera warned that European nations should resist the temptation to “go it alone,” and instead use it as an opportunity to pull closer together.

Even the Vatican has joined the chorus, styling the crisis as an object lesson in the false promise of money and greed. Pope Benedict XVI got the ball rolling during his remarks for the opening session of a Synod of Bishops focused on the Bible.

“We see in the collapse of these big banks that money disappears, it’s nothing,” the pope said. “All these things, which can seem like the true reality upon which one should count, in reality are matters of secondary importance. Whoever builds their life upon these things – upon material goods, success, all those things that seem so important – builds on sand.”

“Only the Word of God is the foundation of all reality,” the pope said.

On Wednesday, Italian Cardinal Renato Martino, President of the Pontifical Council for Justice and Peace and the Vatican’s primary spokesperson for Catholic social teaching, added his voice. Martino was asked for a comment on the global financial woes during a Vatican news conference.

“This crisis, like any crisis, strikes the vulnerable most of all,” Martino said, asserting that greed – “the desire to always have more” – was part of the problem.

“We must remember that a market is not just a factory of profit,” Martino said. “It has to be controlled, both by public authorities and by all the components of the market. Yes, it should generate a profit for those who invest, but that’s not its only purpose. A market has to serve not only those who invest, but also those who produce the wealth, those who do the work.”

As for the voice of the street, this comment from a cell phone retailer in Berlin seems typical: “I was taught that the U.S.A. is the motherland of moneymaking,” Hanna Evers said, in a comment that has been widely cited in European newspapers. “Now all I can see is a herd of headless chickens running around on Wall Street.”