| THE EFFECTS OF THE WORLD CRISIS 13/10/2008 |
| (2008-10-13) |
| Last updated: 2008-10-14 14:45 EET |
”Paralyzed of fear of bankruptcy, banks no longer dare to borrow from one another, and, lacking re-financing, they are freezing loans to the population and companies. Against this background, the heads of state and government in the Euro zone decided to guarantee inter-bank loans and to support banks through refinancing operations, but only temporarily, until December 31st 2009. This is one of the decisions made by the leaders of the Eurogroup members, which held an emergency meeting at the Elysee Palace. President Nicolas Sarkozy stated he wished to engage the entire Europe in the same ambitious and coordinated direction, starting that on Wednesdayt, on the day of the European Council meeting in Brussels.”
For the time being, only the effects of the crisis are being felt, translated into bankruptcies and massive drops at the world stock exchanges. The Bucharest Stock Exchange was no exception to the rule. Last week, the exchange registered the lowest quotations in 13 years of existence. The main indicator, which reflects the development of the listed companies’ quotations, dropped by over 27% over the past week. The Romanian currency, the leu, was also very vulnerable to the international events. After a month of drops, only last week’s intervention of the National Bank of Romania prevented the national currency from exceeding the 4 lei per Euro threshold. The leu’s depreciation, along with the increase in interest rates, had serious effects on those who borrowed Euros from banks. Prospects are also pessimistic for those who now need loans.
According to analysts, Romanian banks have a solid base of deposits, but loaning will slow down its pace and its costs will be higher, and important projects will probably be revised, depending on the situation on the market. Talking about undesired consequences, we should mention the situation at the Galati steel works in eastern Romania, Arcelor Mittal. The drop in the world demand of steel products made the works’ leadership announce that in order to avoid the raise of stocks, it would reduce its activity, which could be translated in the sacking of hundreds of people.
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2025-04-03
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