While Americans celebrated Labor Day, and the New York Stock Exchange was closed for the Labor Day holiday, in Europe, the markets were grim. The London FTSE ended down 3.5 percent, while in France, Italy, and Germany, it was even worse. Those markets were down 5 percent. That does not bode well for the opening bell on Tuesday.
Fears of double-dip recession and problems with Greece topped investor fears, as most scrambled for more secure places to put their money, including gold, which continues to climb. More disturbing still are pronouncements coming from Christine Lagarde, head of the International Monetary Fund (IMF), who warned “a clear crisis of confidence…has seriously aggravated the situation.”
Lagarde, speaking to the German newspaper Der Spiegel, warned that the situation could put the global economy on the brink of a new crisis, and advised European banks to recapitalize. Tensions are also running high as Greece and the IMF have been in arguments over the terms of that country’s bailout.
In a sign that does not portend well for President Obama’s reelection hopes, German leader Angela Merkel’s party suffered a defeat in a recent regional election, notes the Guardian. Ruling governments become easy targets to assign blame, despite the global nature of the economic problems. Even if those replacements in the wings have no better control of the economic situation, they often seem more desirable.
Clearly, the global nature of the economic crisis will not be changed by a shift in any single government. Moreover, no single person or organization has a crystal ball into the future or what it holds. One can only hope that Lagarde’s predictions never come to pass.