Global stock markets slide

Eight years after the Lehman bankruptcy Europe's financial system has learned nothing from its mistakes, the centre-left daily Der Standard complains:

“Reforms were not pushed through because borrowing is such fun when interest rates are at zero, the economy has been stagnating for years and the overheated markets are going into a tailspin. The interesting aspect here is the stubbornness with which the wrong strategy has been clung to. Rather than accepting failure and changing course the ECB and other central banks have pumped more and more money into the markets. It's like an addiction that can only be satisfied by increasing the drug dose. Almost eight years after Lehman we are without doubt facing a lost decade. And there are many indications that the hard times will continue.”

Deutsche Bank share prices have dropped dramatically in recent weeks. If Chancellor Merkel is forced to bail out Germany's largest bank it would be an affront to Southern Europe, business journalist Matthew Lynn writes on the blog Coffee House of the magazine The Spectator:

“It is less than a year ago that the Greek banks were allowed to go down, and the cash machines stopped working. That would be an acutely painful contrast, and one that could hardly fail to be missed. Everyone’s sneaking suspicion about the euro - that it is designed to work only for Germany - will be confirmed. ... Chancellor Angela Merkel is going to be stuck in a very hard place. If she bails out the bank, it looks terrible, yet if she lets it fail, the economy goes down. She will probably be wishing she had something relatively simple - like a million Syrian refugees - to deal with. Because were Deutsche to be in trouble, it could turn into the trigger for the euro to unravel - and that would be very serious indeed.”

The central banks' expansive monetary policy is partially to blame for the return of the financial crisis, the liberal daily Corriere del Ticino believes:

“Last week's stock market losses weren't evidence of a normal correction of prices but the harbinger of a new financial crisis that has its origins in the growing unsustainability of debt in the public and private sectors. What's more, this development is a confirmation that the monetary policy of the key central banks has failed. ... In all likelihood the banks will continue their current monetary policy. That, however, won't extinguish the bushfire sparked by junk bonds. The financial world is now gripped by huge debts that are already effectively uncollectible. ... The ailing economy will cause the fire to spread and bring about a far worse crisis than the one we went through in 2008.”

As far as the centre-right daily Corriere della Sera is concerned the euro crisis has returned with a vengeance:

“The crisis virus is back. After a few years of relative calm it has now officially hit the Eurozone once more, and this time round it won't be so easy to beat. The markets are once again toying with the idea that the Eurozone will fall apart in the more or less distant future. The South and the peripheral states on the one side, the North and the 'hard core' on the other. ... Since 2012 the markets have had the power to conjure up the very consequences that they cite as the reason for their fear and reactions. In 2012 the ECB was able to counteract the markets' magic powers. What's new today is that Mario Draghi is no longer enough to counter the threat. Only the politicians can break the vicious circle. No doubt that's exactly why the markets are showing less faith in things taking a turn for the better.”

The business daily Kauppalehti voices concern over the falling bank share prices:

“It is both surprising and worrying that it is mainly bank shares in Europe that are affected by the stock market slide. European companies are far more dependent than US companies on financing via banks so the situation is alarming not just for the banks but for the entire European economy. … The bank share crash is largely the result of markets overreacting, but it sends a serious warning. The banking sector is the economy's thermometer - and the mercury has risen to a worrying level.”

The stock market slump is above all due to spreading pessimism, the daily La Libre Belgique believes:

“One word sums up the current mood: distrust. To the point that last year's stock profits have been wiped out in little more than five weeks. And that even though nothing has happened recently to aggravate the downwards spiral. But as we know, the stock markets are prey to psychological factors, which can lead to excesses and irrational buying and selling behaviours. ... Clearly confidence is dwindling: the question mark over whether China and the US will drag down global growth, the downswing in the commodities markets and the doubts about the health of certain big banks only fuel the pessimism.”