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page 114 chapter II
The figures illustrate how dramatic the current situa-
tion is. But one thing is decisive above all else: the glo-
bal economy is suffering a disconcerting shock. We
are experiencing more than just a traditional recession
– it is compounded by a wave of insecurity. Many
people have doubts about the very foundations of economic
activity, about stable banks, nations and currencies.
In other words: what we are facing is a deeply
rooted loss of confidence.
How can we regain credibility and people‘s confidence?
To relax the paralysis caused by the shock and
stop the recession, we must reduce the prevailing insecurity
to an acceptable level. A lot has already been
done. The European Central Bank is providing the
banks with virtually unlimited liquidity in return for
securities. The governments are shoring up the credit
economy with guarantees and capital – taxpayers’
money, on which reasonable interest must be paid
and that must, of course, be duly paid back at the end
of the term. The ministers of finance of many countries
are additionally going to the limits of what is
financially justifiable in order to cushion the slump in
demand by means of economic stimulus programmes.
Above and beyond this, all the players on the financial
markets find themselves in the midst of a debate
about what they did wrong and what they can do better
in future. Banks, for example, must confront the
issues of deficits in their risk management, the excessive
complexity of some products, and unsound incentive
structures and remuneration systems for their
managers and staff. And a number of banks will even
have to review their business model. In some cases,