Co-ordinated intervention by the central banks is all very well – but in Europe at least some might be forgiven for feeling a flash of irritation, writes Gillian Tett in her Friday column. Several European banks were four months ago pleading for the ECB to conduct a currency swap with the Fed.
Those appeals were turned down – making this week’s announcement something of a volte-face.
For not only have the central banks now agreed to implement this type of euro-dollar swap, but they will apparently keep it in place for an entire six months, far more than the European banks actually asked for, all those months ago.
This shows how far behind the curve the central banks have been in dealing with this decade’s sorry credit tale, argues Tett. But also suggests they are getting more creative in their approach – the collective spirit is not only badly needed, it’s desperately overdue. It is rather a pity that it took a full-blown crisis for anyone to start addressing the issues raised by the integration of the global financial system and the need for tangible co-ordination by central banks.
Tett concludes:
It is thus little wonder that the financial markets remain so sceptical that central banks will be able to effectively resolve the market funding woes, notwithstanding this week’s statement. This fragmented regime of central banks was clearly unable to prick the credit bubble when it was inflating over the past few years; sadly, it may now be equally unable to contain the unpleasant consequences as this bubble deflates.