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Financial Markets Wait Nervously as Washington Negotiates Bailout

Europe waits nervously as lawmakers in Washington continue to wrangle over a $700 billion rescue package for U.S. financial institutions. Talks between the Bush administration and congressional negotiators continue Friday after reportedly contentious discussions a day earlier ended with no agreement. VOA's Sonja Pace reports from London on the European reaction to the ongoing financial crisis.

Speaking in Washington Friday morning, President Bush promised that a financial rescue package would be passed, warning there is no choice but to act.

Meanwhile, for financial markets in Europe and around the world, it's a nervous wait-and-see.

Economist Margaret Bray of the London School of Economics says there is good reason to be nervous. "This is a situation where panic feeds upon itself," she said. "The financial markets are very jittery and until some sort of more normal action comes back to these markets it does make it very difficult for important aspects of the economy to function."

And that normal economic activity affects not just the movers and shakers in London's financial district or on Wall Street, but small businesses and average workers, as Bray explains.

"You're running a business, you need to borrow to meet your payroll this month because you're not going to get in money for what you're selling for another month - you want to have a loan to put your daughter through college - you want to buy a house - it affects all these things and those have a knock-on effect for people's jobs," she said.

To keep economic activity flowing, central banks around the world have coordinated efforts to inject funds into the banking system. Major European central banks pumped billions of dollars into the system on Friday. Margaret Bray says that is a necessary and effective measure.

"It's being done because the banks are unwilling to lend to each other," she said. "They don't trust each other and because of that it's hard for them to lend to us. It makes their depositors anxious also and the central bank injection of funds is about lending short-term to the banks to oil the wheels of the financial system, to keep these from seizing up altogether."

Bray says it is important to have a larger financial rescue package such as the one under discussion in Washington. But, she says the outlines have thus far been very vague and the success of any such package will depend on the details.