Financial Crisis Watch 15 april 2009

Centre For European Studies
FINANCIAL CRISIS WATCH
Last updated on 15/04/2009 To view full articles click on hyperlinks.

CONTENTS

FOREWORD BY CES HEAD OF RESEARCH

FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATES

FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDE

HIGHLIGHTS

OUR COMPETITORS’ VIEWS ON THE FINANCIAL CRISIS

UPCOMING EVENTS

ANNEX

www.thinkingeurope.eu


“WATCHTOWER”
Foreword by CES Head of Research

A Long, Hot Summer?

Compared to the expectations of the organizers, the protests around the G-20 summit in London
were a disappointment. There was no such thing as a popular uprising against capitalism. The same
can be said – so far – of France where trade unions and leftist groups have already organised general
strikes and are certainly likely to repeat this in future, as the effects of the crisis deepen. Certain
neighborhoods of Berlin will probably see the most violent Mayday riots in their history. And in
particularly crisis-stricken Central European countries like Latvia and Hungary, protests have become a
political factor. Greece had its fair share of ritualized riots by now, which are partly connected to the
crisis.

But as much as these protests are part and parcel of the crisis we are in, we can nevertheless safely
predict that they either peter out in the second half of 2009, as recovery comes closer, or intensify –
which will certainly not be liked by the majority of the population in the member states of the EU. In
other words, more numerous – and more violent – riots will not necessarily mean a weakening of
people’s support for the incumbent government (in most cases in the EU, centre right). People may be
afraid of losing their jobs or part of their salaries. But they are at least equally afraid of someone
firebombing their car, or through strikes, blockades, “boss-napping” or whatever, deepening the crisis
and slowing down the arrival of recovery.

But the mindless destruction caused by what in most EU member states are tiny radical minorities,
points to a larger, and even more political fact: the belief that there is any fundamental alternative to
the market economy, is – EU-wide - really limited to a small group of people. Which is why, in opinion
polls so far, the European Left has been so singularly unable to profit substantially from the crisis. And
this concerns not only the radical, anti-globalist Left, as in Germany’s Die Linke or France’s
Anticapitalist Party. It also concerns Social democrats and Socialists who still fail to see their poll
results rise as dramatically as expected in autumn 2008. We may be, and indeed should be, talking
about more efficient controls in our financial system, or more ethical behavior of bankers.



Early warning mechanisms will have to improve, together with transparency and accountability in any
kind of investment. But these are no “game changers” in the global quest for the politico-economic
system that fits the people best.

That is why the democratically capitalist West, with its many systemic shades inside, and even its
visible shortcomings, is not even remotely in the same situation as communism in 1989. In 1989, the
people of Central and Eastern Europe were perfectly well aware that a full-blown alternative existed
to their own crumbling politico-economic system called state socialism. It was right next door, so to
speak, and many of them had actually seen it work. They wanted that system, and then get on with
their own lives. In that, they were successful to a degree no one could have suspected back then. But
2009 is not the end of Western democratic capitalism, or even the beginning of its unravelling. On the
20th anniversary of 1989, it is worth remembering that.

When the recovery begins to take hold, the challenges won’t go away. Inflation looms, many will
still be out of a job and/or much poorer than today, and it will be exceedingly hard to get rid of the
staggering budget deficits and our addiction to subsidies and state intervention we are just now
developing. But those are the political battles of another day. For the moment, we should focus on the
task at hand – getting to recovery. And maybe enjoying the summer a little.



FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATES
Austria
The global economic downturn has taken a major effect on Austria’s external trade sector, as exports
dropped by 25.2 percent in January year-on-year, according to official data released on April 3. Exports
amounted to 7.2 billion euro, while imports fell by 17.7 percent to 7.8 billion euro. (12/04/2009)
Austrian exports plummet in January (New Europe)

Belgium
Fortis Bank, the former Belgian banking arm of stricken financial group Fortis, reported a loss of 20.6
billion euro (27.5 billion dollars) for 2008 owing to the group's break-up and losses on toxic assets. The
bulk of the loss, which was roughly in line with a previous estimate, came from the "negative impact of
12.5 billion euro" relating to the parent company's carve-up by the Dutch, Belgian and Luxembourg
state. As part of a bailout of the group, the Belgian state took over Fortis Bank and is now in the
process of selling a 75 percent stake to French banking group BNP Paribas. (14/04/2009)
Fortis Bank Belgium posts EUR 20.6bn loss for 2008 (EUbusiness)

Fiat staff in Brussels closeted local managers inside their office for several hours in another apparent
"boss-napping" linked to worker anger over job cuts in Europe. The dispute centered on failed
negotiations over 24 planned redundancies at a sales and repair office in the Schaerbeek suburb.
(09/04/2009)
Fiat bosses held by Belgian workers in jobs dispute (Reuters)

Bulgaria
The latest report of the Italian banking group Unicredit states that Bulgaria is inevitably going to
undergo a two-year recession. According to the report, cited by the Pari Daily, Unicredit, which is the
owner of the Bulgarian Bulbank, expects that the Bulgarian economy will shrink by 3 percent in 2009
and by 1 percent in 2010. (10/04/2009)
Unicredit: Bulgaria destined for economic apocalypse (Sofia Novinite)

The US Secretary of Commerce, Gary Locke, has congratulated Bulgarian Foreign Minister Kalfin on
Bulgaria's stable economy and banking system. Gary Locke also congratulated Minister Kalfin in his
role as Deputy Prime Minister in charge of the economy, for the country's substantial foreign currency
reserves, which served as a stability factor amidst the global financial crisis. (10/04/2009),,,,,,,,,,,,,,,,,,,,,
US Secretary of Commerce praises Bulgaria's economic stability (Sofia Novinite)

The Manager of KIA Motors Bulgaria, Hrabrin Ivanchev, has predicted an overall decline of 30 percent
of new car sales in Bulgaria in 2009. (08/04/2009)………………………… ………………………………………………….
Expert predicts 30 percent drop in Bulgaria new car sales (Sofia Novinite)



The Manager of KIA Motors Bulgaria, Hrabrin Ivanchev, has predicted an overall decline of 30 percent
of new car sales in Bulgaria in 2009. (08/04/2009)………………………… ………………………………………………….
Expert predicts 30 percent drop in Bulgaria new car sales (Sofia Novinite)

Czech Republic
The ongoing global economic crunch is set to bite deep into the pay packets of the Czech executives.
Referring to revelation made by a recent survey conducted by the Economic Chamber, local reports
said that teo-fifths of Czech firms would be cutting bonuses to their chief executives, and a fifth of
businesses would reduce their managers’ pay. (12/04/2009)
Two-fifths of firms to cut bonuses to managers (New Europe)

Estonia
In a recent meeting between the Estonian and Latvian Prime Ministers, the two noted that regardless
of the current economic crisis, Estonia’s aim is to adopt the euro as fast as possible. Estonian Prime
Minister Andrus Ansip said the challenges will lie in fulfilling the budget criterion. (14/04/2009)………..
Estonia sets euro aims high (The Baltic Times)

Estonian Prime Minister Andrus Ansip has said that the country’s Unemployment Fund is on the verge
of bankruptcy as it struggles to make payments amid a climbing joblessness rate. “If nothing is
changed then practically all Unemployment Fund’s reserves will be spent this year. There will be only
80 million kroons left of the current 2.7 billion kroons,” Ansip said. (02/04/2009)....................................
Unemployment board on the verge of bankruptcy (The Baltic Times)

France
President Nicolas Sarkozy pledged €1.5bn ($1.9bn, £1.3bn) on 10 April for a social investment fund for
unemployment and training in an attempt to build support from unions and employers as concerns
mount over growing militancy in industrial protests. The French President met union leaders and
employer representatives to announce the new fund, which will be jointly managed by the state and
France’s social partners. He challenged unions and employers to match the government’s funding.
(10/04/2009)
Sarkozy pledges €1.5bn to help jobless (Financial Times)

Germany
Finance Minister Peer Steinbrueck said in an interview published on 12 April that he has devised a
master plan to help struggling German banks but said he still opposed creating a single "bad bank" for
problem loans. Creating a bad bank would be the most radical move taken by a big economy to try to
overcome the global financial crisis, which began when a collapse in property prices snowballed into a
lending freeze. (14/04/2009)…………………………………………………………………………………………………………………
Germany finance minister to unveil bad banks plan (EurActiv)



Shares in General Motors slumped more than 17 percent in Frankfurt amid growing concern the
automaker might file for bankruptcy. The New York Times reported late on 12 April that the U.S.
Treasury Department was directing GM to lay the groundwork for a bankruptcy filing should it fail to
reach give-back deals with stakeholders by the deadline set by the Obama administration.
(14/04/2009)
GM tumbles in Germany amid bankruptcy fears (CNBC)

The world could face high inflation and a “crisis after the crisis” when the global economy recovers,
Peer Steinbrück, German finance minister, has warned. The comments are the latest sign of concern
from Germany at the extra-loose monetary policies conducted by central banks around the world and
the ever-larger fiscal stimuli being unveiled by governments. “I am concerned that the
countermeasures we are seeing around the world, financed by enormous amounts of debts, could be
paving the road to the next crisis,” Mr Steinbrück said. (12/04/2009)…………………………………………………….
Germany warns on ‘crisis after crisis’ (Financial Times)

Greece
The Greek tourist industry faces a grim summer, with bookings down by 25 to 30 per cent as
recessions deepen in Germany and the UK, Greece’s main tourist markets. Dozens of four-star and
five-star hotels in Crete, Rhodes and Corfu, the most popular islands, decided against opening for
Easter, the traditional start of the season, in an attempt to keep down costs. (13/04/2009)ddddddddd
Greek tourism faces summer drought (Financial Times)

Hungary
Hungary's incoming Prime Minister Gordon Bajnai has promised to tackle his country's economic crisis
head-on, but he has little time and takes over an economy expected to contract 6 percent this year
and is kept afloat by a $25.1 billion IMF-led lifeline. (14/04/2009)ccccccccccccccvvvvvvvvvv
Hungary's new PM takes over a nation in crisis (EurActiv)

Hungary, struggling in the global slump, met the public deficit limit required to join the eurozone last
year and expects to do so again in 2009, Finance Minister Janos Veres said. "Last year, Hungary's
public deficit was 3.4 percent (of gross domestic product), but taking out the costs of Hungary's
pension reform, the public deficit is 2.8 percent (of GDP), under the three percent target," he said.
(01/04/2009)
Hungary says it meets EU deficit limit in 2008 (EUbusiness)



Ireland
Hundreds of Irish rugby fans who were due to travel to London for a crucial European cup tie have
returned their tickets in a sign of how Ireland’s biting recession is hitting middle class professionals.
The lengthening dole queues and the grounded helicopters of Ireland’s bankrupt property developers
may be the common leitmotif for Ireland’s current economic plight. (10/04/2009)………………………………
Ireland’s budget infuriates middle class (Financial Times)

The Irish government has announced plans to establish a 'bad bank' in a bid to quarantine toxic assets
and restore confidence in its ailing financial system. The move comes as part of a tough emergency
budget, and makes Ireland the first EU member state to adopt such a strategy to deal with the credit
crisis. Finance Minister Brian Lenihan said the move would give Irish banks a "clean bill of health" and
get credit flowing to individuals and businesses in the real economy. (08/04/2009),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Ireland to set up Europe's first 'bad bank' (EurActiv)

The Irish Republic has unveiled its second budget in six months to deal with its rapidly contracting
economy. The emergency budget includes a large rise in taxes and a cut in spending, to deal with
Ireland's budget deficit. Finance Minister Brian Lenihan also said an independent agency would take
over banks' bad assets to try and restore lending. (07/04/2009)nnnnnnnnnnnnnnnnnnnnnnnnnnnnnn
Ireland unveils emergency budget (BBC)

Latvia
Latvia’s unemployment rate is continuing to skyrocket, sparking widespread concern among politicians
and workers. Latvian Welfare Minister Uldis Augulis said that according to the latest information the
registered unemployment is 10.4 percent, a total of 113,000 members of the workforce. About 16
percent of the total includes people 20-24 years old, many of whom were laid off after the
construction industry slowed down. (08/04/2009)……………………………………………………………………………
Unemployment continues to rise (The Baltic Times)

A 200 million euro (265 million dollar) loan payment from the International Monetary Fund (IMF) to
Latvia has been delayed because it failed to amend its budget, Latvia's prime minister said. "The next
big payment is due from the European Commission and that is about one billion euros," he said.
(02/04/2009)
Latvia suffers delay of IMF loan (EUbusiness)

Lithuania
Prime Minister Kubilius said he welcomed the idea of fast-track euro adoption, after the Financial
Times brought a report to light in which the International Monetary Fund urged the EU to allow CEE
countries to adopt the euro without the benefits of full membership in the eurozone. (08/04/2009)
Euro fast track interests PM (The Baltic Times)



Crisis-hit Lithuania failed to keep below an EU-set public deficit limit last year, the government
announced, failing a key test as the country bids to join the eurozone. Finance Minister Algirdas
Semeta told reporters that the 2008 public deficit was 3.2 percent of gross domestic product.
(01/04/2009)
Lithuania's 2008 deficit 'breached EU limit' (EUbusiness)

Luxembourg
Luxembourg, Switzerland and Liechtenstein blasted a G20 offensive against tax havens, regretting
their inclusion on an international "grey" list of offshore financial centres. "I think that the treatment
given to some countries is a bit incomprehensible," Luxembourg Prime Minister Jean-Claude Juncker
told journalists as he arrived to chair a meeting of eurozone finance ministers in Prague. (03/04/2009)
Luxembourg, Switzerland blast G20 tax haven offensive (EUbusiness)

Malta
Provisional data for international trade show that the visible trade gap in February 2009 stood at 87.2
million euro, down by 14.7 million euro compared to the same month last year. There was a decrease
in imports of 76.2 million euro and a decrease in exports of 61.5 million euro. (12/04/2009)
Trade gap shrinks 14.7 percent to 87.2 million euro (New Europe)

The Netherlands
Dutch electronics giant Philips has announced it lost 57 million euros in the first quarter of 2009, in
line with forecasts. Philips' CEO said the company had witnessed a "significant further deterioration"
of its markets during the quarter. (14/04/2009)
Philips lost 57 million euros in first quarter (France24)

Dutch ING plans to sell operations worth up to 8 billion euros ($10.6 billion) to reduce risk, focus its
bank on Europe, and manage its banking and insurance separately, boosting its shares. ING, which was
loss-making in 2008 and received a 10 billion euro injection from the Dutch state last October, said in a
statement it wants to shed non-core activities worth 6 billion to 8 billion euros, or 10 to 15 businesses.
(09/04/2009)
ING to shed up to $10.6 billion of assets (Reuters)

The European Commission said it had launched an in-depth probe into the Dutch state's bailout of
Fortis Bank Nederland last year on concerns the deal may have broken state aid rules. The
investigation covers the state's takeover of the Dutch banking arm of stricken financial services group
Fortis last October and loans to it which the commission said amounted to "tens of billions of euros."
(08/04/2009)
EU opens in-depth state-aid probe into Fortis' Dutch bank (EUbusiness)



Poland
Poland became the second country to seek access to a new credit line from the IMF for strongly
performing economies to buttress them against the global economic crisis. Prime Minister Donald
Tusk announced in Warsaw that the country was interested in a one-year precautionary arrangement
under the IMF’s Flexible Credit Line (FCL) for $20.5 billion. (14/04/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvv
Poland seeks $20.5 billion credit line from IMF (International Monetary Fund)

Thousands of Polish migrants are applying for welfare benefits as the recession wipes away the jobs
that lured them to the UK, the Financial Times has learnt. Employment and benefits advisers are
reporting a surge in the number of Polish people coming to them for help. That suggests many Poles
are determined to ride out the economic downturn in the UK even though anecdotal reports suggest
thousands of central European workers are returning home. (12/04/2009)//////////////////////////////
Poles seek UK benefits as downturn bites (Financial Times)

Portugal
In February 2009 the seasonally adjusted index for retail trade turnover at constant prices registered a
year-on-year growth rate of -4.8 percent. Employment and wages and salaries presented year-on-year
growth rates of 0.2 percent and 3.8 percent, respectively. (12/04/2009)
Negative year-on-year rate in retail trade (New Europe)

Romania
The International Monetary Fund has approved in principle the agreement with Romania for a massive
bailout loan to deal with the effects of the global crisis. This has been announced by Romania's Prime
Minister, Emil Boc, who has also said the formal IMF reply was expected by April 14-15. Thus, in a
special session on Saturday, April 11, the Romanian cabinet will meet to approve an Emergency
Ordinance on budget readjustment and revision so that the IMF board could discuss the bailout loan
for Romania on May 4. (10/04/2009)
IMF approves in principle bailout loan to Romania (Sofia Novinite)

Slovakia
In revised GDP figures released on April 7, the National Bank of Slovakia (NBS) said that Slovakia’s
economy would contract by 2.4 percent in 2009. The bank attributes its 4.5 percentage-point revision
entirely to the global economic downturn and says the country’s economy should resume growing in
2010, when GDP is forecast to increase by 2 percent, with growth accelerating to 3.2 percent in 2011.
The central bank predicts that the unemployment will reach 11 or 12 percent. (13/04/2009)
NBS: Slovakia is headed for its first recession (Slovak Spectator)


Last updated on 15/04/2009 To view full articles click on hyperlinks

Slovenia
Slovenia's government on 9 April urged the former chief executive of the country's largest bank, NLB,
to return a one-million-euro (1.3-million-dollar) bonus and announced a new law to limit executive
wages. "The government, as the legal representative of the largest shareholder in the bank, will use all
the means available to make the former CEO return the bonus," Finance Minister Franc Krizanic told
journalists, citing the current economic crisis. (10/04/2009)……vv………………………………………………………….
Slovenia urges executive to give back EUR 1 million bonus (EUbusiness)

Sweden
Sweden's annual inflation rate plunged to 0.2 percent in March from 0.9 percent in February, due to
low interest rates for home owners and price cuts on electricity, the country's statistic's agency said.
Statistics Sweden said more expensive food, transportation, rent and cultural activities counteracted
the drop somewhat. Consumer prices rose by 0.3 percent between February and March, mainly due to
higher fuel prices. (14/04/2009)dddddddddddddddddddddddddddddddddddddddddddddddddddddd
Swedish inflation drops to 0.2 pct in March (CNBC)

Sweden's government said it would extend for six months a plan worth 1.5 trillion kronor (138.5 billion
euro, 183.8 billion dollars) aimed at helping banks under pressure from the global credit crunch.
Sweden at the end of October presented its vast bank guarantee programme aimed at helping banks
and financial institutions with liquidity problems secure needed loans. The plan was originally set to
expire on April 30, but the deadline would now be extended through October 31 this year with the
possibility of further extension if deemed necessary. (02/04/2009),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Sweden extends 139-billion-euro bank rescue plan (EUbusiness)

UnitedcKingdom
British media reported that British Telecom will cut another 10,000 jobs in coming months to reduce
costs. BT calls the number "speculative". Preliminary results out next month are likely to be among
BT's worst since its 1984 privatisation. (12/04/2009)mmmmmmmmmmmmmmmmmmmmmmmmm
Media reports say BT to slash 10,000 jobs (France24)

Britain’s banks will provide an extra £50bn of lending this year, Prime Minister Gordon Brown said.
Other banks would follow Royal Bank of Scotland, Lloyds and Northern Rock – all of which are partly or
fully nationalised – in committing to bolster lending, Mr Brown said. RBS, Lloyds and Northern Rock
have committed to an extra £44bn in lending but this has been offset by a fall in loans by foreign banks
in the UK – notably Icelandic and Irish institutions. (08/04/2009)nnnnnnnnnnnnnnnnnnnnnfffffffffffffff
PM predicts £50bn lending rise (Financial Times)



FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDE

Asia
Leaders of the key countries of Asia and the Pacific are preparing to meet in the Thai resort town of
Pattaya to look at ways they can contribute to a new post-crisis global financial architecture. Korn
Chatikavanij, Thailand’s finance minister, will submit an early draft of a plan to create an infrastructure
fund for the Association of South East Asian Nations (ASEAN), which Thailand currently chairs.
(09/04/2009)
Asian leaders prepare for Pattaya summit (Financial Times)

China
China has unveiled plans to establish a $10bn (£6.8bn) investment fund for south-east Asian countries.
It has also offered credit of $15bn to ASEAN. Chinese Prime Minister Wen Jiabao had planned to
announce the fund at the cancelled ASEAN summit. (13/04/2009)dddddddddddddddddddddddddddd
China offers funds to boost Asean (BBC)

China is planning a new economic stimulus package targeted at boosting consumption. The
government will also continue to bolster the economy using fiscal policies Gao Huiqing, head of the
Economic Forecast & Development Strategy department of the governmental think tank, said.
(12/04/2009)
China plans more stimulus to boost consumption (Reuters)

China’s central bank warned it planned to “strictly control” credit to some sectors of the economy
after the country recorded a record surge in bank loans and money supply in March. The central
bank’s statement, made after a routine quarterly monetary policy meeting, followed the release on 11
April of the money supply data. The data appeared to confirm that Beijing’s stimulus measures are
revitalising the domestic economy but raised credit risk and inflation concerns. (12/04/2009)
Beijing to tighten controls on credit (Financial Times)

Vehicle sales in China, the world’s largest car market, climbed to a record in March, extending gains
from the previous month, helped by government policy measures to bolster demand in both urban
and rural areas. A total of 1.10m vehicles was sold last month, up from 1.06m in March 2008, which
previously posted the highest monthly sales. (09/04/2009)mmmmmmmmmmmmmmmmmmmmmm
China car sales reach record high (Financial Times)



Japan
Japanese wholesale prices are falling at their fastest rate since 2002, March figures showed, as
weakening domestic demand on top of falling commodity prices drives Japan toward its second bout
of deflation this decade. With interest rates already almost at zero, analysts say the Bank of Japan has
limited weapons to fight deflation in the country's worst recession since World War Two.
(12/04/2009).........bbbbb............................................................................................................
Japan wholesale prices slide, deflation ahead (Reuters)

Russia
Russia posted a budget deficit of 50 billion rubles ($1.5 billion) or 0.1 percent of the country`s gross
domestic product in the first quarter, Finance Minister Alexei Kudrin said on 9 April.
According to the finance minister, federal budget revenues declined by 473 billion rubles ($14.16
billion) or 24.5 percent in the first quarter on the same period of last year while expenditures
increased by 447 billion rubles ($13.38 billion) or 33.6 percent. (10/04/2009)nnnnnnnnnnnnnnnnnnnn
Russia posted $1.5 bln budget deficit in first quarter (Russian Information Network)

Russian railroad monopoly RZD said its losses in the first three months of 2009 were 26.8 billion rubles
($800 mln), while second-quarter losses were expected at 14.2 billion rubles ($418 mln). The 2009 net
losses of RZD, or Russian Railways, could total 49.7 billion rubles ($1.5 billion), the director of the
monopoly`s corporate finance department said. (10/04/2009)
Russia`s RZD posts $800 mln loss in 1Q09 (Russian Information Network)

Russia will spend 3 trillion rubles ($90 billion) on measures to fight the economic crisis, including 1.4
trillion rubles ($42 billion) from the federal budget, the Prime Minister said.
He also pledged large-scale government financial assistance to key defense companies, apart from the
MiG aircraft building corporation, which has already received 15 billion rubles ($449 million), and the
Khrunichev research and production space center, which has been given 8 billion rubles ($239.5
million). He said a total of 70 billion rubles ($2 billion), or 170 billion rubles ($5 billion), taking into
account loan guarantees, would be channeled into the defense sector this year. (06/04/2009) fffffffffff
Russia to spend $90 bln on anti-crisis measures in 2009 (Russian Information Network)ffffffffffffffffffff

Turkey
After successfully completing a three-year, $10-billion stand-by deal in May 2008, Turkey is discussing
a new loan deal with the International Monetary Fund of up to 45 billion dollars, which is hoped will
help combat the expected recession. (11/04/2009),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
IMF to meet Turkish authorities over loan deal (France24)



Ukraine
Few areas of Europe have taken such a devastating blow from the world economic crisis as the
industrial heartland of eastern Ukraine, home to giant enterprises in the steel and metals industry in
which orders have dried up nearly completely and prices have plummeted. (07/04/2009),,,,,,,,,,,,,,,,,,,,,,
Economic crisis sweeps eastern Ukraine (International Herald Tribune)

UnitedcStatesc
President Barack Obama said the $787 billion economic stimulus plan is beginning to take hold and
that work is coming in "ahead of schedule and under budget." Obama highlighted the administration's
2,000th project funded through the $48.1 billion part of the program allocated specifically to
transportation infrastructure projects. (13/04/2009)
Obama extols virtues of stimulus spending (CNBC)

Chrysler and potential partner Fiat SpA are discussing a new management and board for the U.S.
automaker under a proposed alliance that could see Fiat take a stake in Chrysler. Chrysler is racing to
complete a partnership with the Italian automaker by April 30, with the Obama administration
warning the alternative would be bankruptcy. (13/04/2009)mmmmmmmmmmmmmmmmmmmmm
Chrysler, Fiat discuss new management and board (Reuters)

U.S. officials will not look to close any banks based on the results of "stress tests" being conducted to
determine how the largest U.S. banks would fare under more adverse economic conditions, a source
familiar with official talks said on 9 April. (09/04/2009)cccccccccccccccccccccccccccccccccccccccccccccc
No U.S. banks will close due to stress tests (Reuters)

HIGHLIGHTS
Informal ECOFIN Council in Prague on 3rd and 4th April 2009:

At an informal meeting in Prague, EU Finance Ministers and Central Bank Governors reached
agreement on key principles for the reform of financial market supervision. The meeting was chaired
by Czech Finance Minister Miroslav Kalousek. On the second day of the informal ECOFIN meeting, the
Finance Ministers and Central Bank Governors discussed the reform of the structure used to supervise
the financial market in the EU.



At the beginning of the informal meeting of Ministers and Central Bank Governors, Mr. de Larosière
set out the main conclusions and recommendations of his financial supervision report. He was
followed by Commissioner Charlie McCreevy, Commissioner Joaquín Almunia and President of the
European Central Bank Jean-Claude Trichet. The participants then discussed the proposed institutional
changes. The Ministers and Governors singled out the excessive focus on the supervision of individual
financial market institutions and the related neglect of systemic risks as shortcomings of the current
system. The early warning mechanism was also found to be wanting. The Ministers and Governors
concluded that supervision of macro-financial stability needs to be strengthened at EU level, and
therefore they supported the creation of a new body, the European Systemic Risk Council.
(04/04/2009)
STATEMENT by the informal Ecofincccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Ministers and Governors agree on principles for financial supervision reform (EU2009.CZ)

G20 Summit in London on 2nd April 2009:

The G20 agrees to channel $1.1 trillion (€832bn) into the IMF and other institutions and to tighten
rules on financial markets. G20 leaders announced measures to promote transparency and to
safeguard against system-wide threats and excessive risk-taking. These include new rules on bankers’
pay and bonuses - an issue that has sparked public anger - and an end to tax havens that do not share
tax information.

To help countries in trouble, the leaders endorsed $500bn (€370bn) in new funds for the IMF, bringing
its resources to $750bn (€556bn). The EU is contributing €75bn of this. In addition, G20 leaders agreed
to a $250bn (€185bn) increase in the IMF's overdraft facility for struggling member countries. A
further $100bn (€74bn) will be available to fund development, and will be channelled via banks set up
by donor countries. $250bn (€185bn) will get trade flows started again. The leaders said the stimulus
should amount to $5tr (€3.7tr) by next year, the largest the world has ever seen. Leaders predicted
this would create millions of jobs worldwide.

The G20 also gave the World Trade Organisation responsibility for naming and shaming those who
resort to protectionism. It pledged to conclude rapidly the Doha trade talks- which could boost the
world economy by $150 billion.

In line with EU recommendations, the G20 plan gives international financial institutions a bigger role in
monitoring economic risks. It also gives emerging and developing economies more of a voice in these
institutions. (02/04/2009).

G20 summit - leaders' statement: Download pdf fileccccccccccccccccccccccccccccccccccccccccccccccccc
Remarks by President Barroso, press conference: "London G20 results: "much more ambitious than
expected"
G20 leaders confident and determined in face of economic crisis (European Commission)



OUR COMPETITORS’ VIEWS ON THE FINANCIAL CRISIS
PES

The Global Progressive Forum 2009, co-organised by the PES, the PES Group in the European
Parliament and the Foundation for European Progressive Studies, took place in Brussels on 2nd and 3rd
April 2009. Along with Bill Clinton, the Global Progressive Forum brought together politicians, trade
unions, NGOs and representatives of progressive international organisations and aimed to coincide
with the end of the G20. Discussions focused on finding new answers to the global economic and
financial, food, climate and energy crises. A call for a ‘Global New Deal’ was launched, which calls for
new fairness and a new respect for the planet. A ‘Global New Deal’ also includes the biggest
coordinated fiscal stimulus in modern history to stop unemployment and poverty, financial market
regulation and supporting the transition to a renewable and energy efficient economy. (03/04/2009)
Global Progressive Forum 2009 (PES News)

UPCOMING EVENTS
Event: Spring Meeting: World Bank Group and International Monetary Fund ……………………
Date: 25-26 April 2009, Brussels

Event: Brussels Economic Forum: "Beyond The Crisis: A Changing Economic Landscape"v
Date: 14-15 May 2009, Brussels

Editor: Roland Freudensteinffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
Research Assistance: Katarína Králikovácccccccccccccccccccccccccccccccccccccc/cccccccccccccccccccccc
Design: José Luis Fontalbaccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Questions and comments: briefs@thinkingeurope.eu



ANNEX
Financial Stability Frameworks and the Role of Central Banks: Lessons from the Crisis

Author/Editor:,Nier,vErlendmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm
Authorized for Distribution: April 1, 2009

Summary: This paper sets out general principles for the design of financial stability frameworks,
starting from an analysis of the objectives and tools of financial regulation. The paper then offers a
comprehensive analysis of the costs and benefits of the two main models that have emerged for
modern financial systems: the integrated model, with a single supervisor outside of the central bank,
and the twin-peaks model, with a systemic risk regulator (central bank) on the one hand and a conduct
of business regulator on the other. The paper concludes that the twin-peaks model may become more
attractive when regulatory structures are geared more explicitly towards the mitigation of systemic
risk-including through the introduction of new macroprudential tools that could be used alongside
monetary policy to contain macro-systemic risks; through enhanced regulation and special resolution
regimes for systemically important institutions; and a more holistic approach to the oversight of
clearing and settlement systems. Since the optimal solution may well be path-dependent and specific
to the development of financial markets in any given country, a number of hybrid models are also
discussed.

Series: Working Paper No. 09/70

Subject(s): Central banks | Financial crisis | Monetary policy | Financial stability | Financial systems |
Financial sector | Bank supervision | Bank regulations | Bank resolution | Credit risk | Risk
management

Author's keyword(s): Systemic risk | monetary policy | prudential regulation | crisis resolution

Financial Stability Frameworks and the Role of Central Banks: Download pdf file

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Financial Crisis Watch 15 april 2009

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