EoW March 2008

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4
Credit shockwaves
The shockwaves heading out from the US
sub-prime mortgage losses have well and truly
washed up on European shorelines.
Firstly, here in the UK, there was the near
collapse of Northern Rock which needed some
£25bn of taxpayers’ money to keep it afloat.
The ‘Rock’ has since been nationalised in a
temporary move after a suitable buyer failed to
materialise.
Now another government – the German one
– has stepped in to shore up the finances of IKB
to the tune of £1.1bn.
This, although a smaller amount, again has far
reaching consequences of taxpayers picking
up the bill of a failing financial giant.
IKB is a part of KfW Bankengruppe which, in
turn, is owned by no less than 16 of the German
states.
The financial carnage doesn’t stop there. Com-
merzbank, also in Germany, has been hit to the
tune of £723m, all because of sub-prime losses.
Even the greatest banking bastion of all –
Switzerland – cannot escape the bloodletting.
UBS suffered a £9bn loss in 2007 and many
financial experts predict that the crisis at the
bank will last as long as the credit crunch.
That credit crunch has been squeezing markets
around the globe for the last six months now
and will, experts believe, lead the US to cutting
interest rates to just 2.5%.
Does it not seem strange then that brokers
working in the City of London have just re-
ceived record bonuses for last year’s work?
It seemsthat life in the city is all smiles – even
while the possibility of recession and financial
gloom rings loud and clear in the UK capital.
Wire and cable companies will, no doubt, be
hoping that business is also booming at wire
2008 in Düsseldorf later this month.
Let us hope that this industry can be one of
those blossoming should the financial crisis
deepen.
David Bell
The International Magazine
for the Wire and Cable Industries
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