Financial crisis - Central Banks step in

The financial crisis as far as the Eurozone is concerned, has had some unexpected negative spin offs. One of the most alarming is the sell off of shares in banks perceived to have exposure to countries with potentially critical debt problems.

Losing billions in capital value is bad enough but the banks targeted,also find it difficult to raise funds for their day to day activities, as lenders are worried about the domino effect, should Greece for example, default on it's financial obligations. French banks in particular have been vulnerable in this respect but it has also dragged down the banking sector in general.

To ease this liquidity problem, the European Central Bank and the Central Banks of England, Japan, US and Switzerland, have promised to provide huge amounts of dollar funding and this move has underpinned the equity markets, with UK bank shares gaining between 4% and 7% yesterday and Asian equity markets surging on the back of this news at their close this morning. This looks to be reflected at the open of Euopean markets also.

Talks are taking place in Poland at this moment between European Finance ministers to discuss the European debt crisis, attended also by senior US representatives.