Nov 30 - Central banks around the world took dramatic action to make sure European banks have enough money as the euro zone sovereign debt crisis worsens. Bobbi Rebell reports.
Central banks around the world took dramatic action to make sure European banks have enough money as the euro zone's sovereign debt crisis worsens. The US Federal Reserve, The European Central Bank and the central banks of Japan, Britain, Canada and Switzerland all agreed to reduce the cost of temporary dollar loans by half a percentage point. Those loans are called liquidity swaps. It will start on Monday. Canadian Finance Minister Jim Flaherty: SOUNDBITE: JIM FLAHERTY, CANADIAN FINANCE MINISTER (ENGLISH) SAYING: "Well, it's one of the tools that's available to try to avoid credit crunches. And we saw credit crunches in 2008 and that's not to be desired, so it was a good thing to do." Financial markets reacted positively to the move - on relief central banks are stepping up to help. But Ben Steil, Senior Fellow and Director of International Economics at the Council on Foreign Relations is skeptical about any lasting impact from the central banks' actions: SOUNDBITE: BEN STEIL, SENIOR FELLOW AND DIRECTOR OF INTERNATIONAL ECONOMICS, COUNCIL ON FOREIGN RELATIONS (ENGLISH) SAYING: "They help in the very, very short term. And what I mean by that is over the next few days this will marginally reduce financing costs for dozens of European banks. That is helpful. That buys us a few more days." But the problems in Europe are without an easy-to-digest solution. European Council President Herman Van Rompuy. SOUNDBITE: EUROPEAN COUNCIL PRESIDENT, HERMAN VAN ROMPUY, (ENGLISH) SAYING: "The EU is going a very difficult, and I would add, a dangerous period, no doubt about that. Since the summer, it's no longer a problem in this or that country. The trouble has become systemic. We are witnessing a full-blown confidence crisis. Some may blame it on the irrationality of the market. But it's a fact and we need to confront it." Separately, China made a move to boost liquidity as well, as its economy shows signs of slowing down- due in part to the troubles of its trading partners in Europe. Bobbi Rebell, Reuters.