World leaders tell US to take 'responsibility' for financial failure
WASHINGTON (AFP) — World leaders told Washington Tuesday it has a responsibility to the world to shore up its teetering economy, after lawmakers blocked a 700-billion dollar bailout plan.
"I believe that the Americans have come to realise that they have a responsibility to the rest of the world as well as to themselves," British Prime Minister Gordon Brown told Sky News and BBC television.
"The US must take its responsibilities in this situation, must show statesmanship for the sake of their own companies and for the sake of the world," echoed European Commission spokesman Johannes Laitenberger.
As the financial crisis claimed yet another victim in Europe and markets reeled, US President George W. Bush insisted that the House of Representatives' vote against the package was "not the end."
"The reality is that we are in an urgent situation and the consequences will grow worse each day if we do not act," he said, adding that the cost of the plan was much less than the trillion dollars and more lost on Monday.
US and European markets were higher Tuesday as investors hoped another vote on the US financial bailout package would see the plan passed and a start made on reining in the global turmoil.
However, the money markets -- where the banks normally get their essential short-term financing -- remained virtually at a standstill despite central banks pouring in billions more dollars of liquidity.
Key stakeholders in the global economy such as German Chancellor Angela Merkel -- with few exceptions, such as India, which said its system was robust -- called for a fresh vote on Capitol Hill to restore market confidence.
"We should not let the world financial system collapse," said new Japanese Premier Taro Aso, with European Central Bank chief Jean-Claude Trichet warning the threat was greater than ever in its 10-year existence.
The deepening crisis claimed another high-profile European victim, Dexia bank, rescued in a dawn deal by France, Belgium and Luxembourg who provided 6.4 billion euros (9.2 billion dollars).
French President Nicolas Sarkozy called French bankers in and "reminded banking establishments of their priority mission to finance the economy," a statement said.
Ireland, the first eurozone country to fall into recession, promised to guarantee all deposits so as to bolster confidence in the banks and the economy after Dublin stocks plunged 13 percent on Monday.
"Yesterday the (US) and the world looked to Washington for leadership, and Congress once again came up empty-handed," Republican presidential candidate John McCain said on the campaign trail in Iowa.
Despite the modest rebound made Tuesday for stocks, analysts warned that worse could be yet to come, with the financial crisis drying up the credit on which business depends.
UniCredit economist Marco Annunziata warned the crisis of confidence "is now threatening to turn into a self-fulfilling run on the system, which could trigger a global financial economic meltdown."
Against this backdrop, some analysts suggested there could be concerted central bank action to cut interest rates in an effort to get the banks lending again since the liquidity provisions are not doing the trick.
"Central banks emergency cuts: if not now, when?" the Citigroup analysts asked, saying the risk on inflation had to be judged less serious than the risk to the economy and financial system.
Pope Benedict XVI's right-hand man, Vatican Secretary of State Tarcisio Bertone, said that the "tragic outcomes of all political ideologies" were symptomatic of the hunt "solely for short-term profit."
Identifying greed with good, "they end up erasing the benefit itself," he added.
