Stock markets around the world nosedived on Friday, following a day in the red for European and US markets. Investors are nervous at the prospect of a sudden slowdown in the US economy, as well as having the eurozone debt crisis on their minds.
The ongoing sell-off follows the biggest one-day points decline on Wall Street since the 2008 financial crisis, AP reports.
Major EU markets fell on Thursday, with the euro sliding against the dollar over uncertainty about the ability of Italy and Portugal to stave off an impending crisis. On the same day, the European Central Bank tried to calm nervous markets by offering more emergency credit.
It is against this backdrop that German Chancellor Angela Merkel will hold a conference call with French President Nicolas Sarkozy and Spanish Prime Minister Jose Luis Rodriguez Zapatero to discuss the situation.
According to Mark Geary, president of the International Executive Search Federation, the ongoing turmoil has seen banks and governments swap the roles they held during the 2008 crisis.
“Previously, we had a banking crisis where the banks had lent too much money. The banks have undergone considerable change and reform: they have strengthened their balance sheet, they have had the stress test,” he said. “What we are seeing now is a fiscal crisis. It is where governments have not balanced their books.”
Geary added that now it is time for the banks to rescue their governments.
“I think it is ironic,” he said. “Previously, the governments had to come to the aid of the banks and now that some of the economies are not in good condition themselves, because the governments spend more than they are bringing in, now they are going cap in hand to their banks, saying ‘You have got to support us’ and obviously banks do not like that.”