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Fears over the conditions of the world economy are continuing to grow after the markets saw big drops in banking shares, in particular French banks yesterday.

In the US, the Dow Jones index was down at the end of trading by 2.7%. Similarly, the FTSE 100 fell by 2.4% and Frankfurts Dax by 4% regardless of the new jobs plan worth £282bn revealed by President Obama.

Concerns have also been intensified by the resignation of the European Central Bank’s cheif economist, Juergen Stark and there has been much speculation as to why he would leave the bank at such a crucial time in the revival of the world economy. Some have suggested that the depature was a result of arguements over the ECB’s decision to buy debt from suffering economies in the eurozone, as the bank has already started purchasing debt from Spain and Italy despite opposition from Germany which fears the move will have negetive consequences for the bank itself and therefore Europe as a whole. In addition, there are concerns that by taking on other’s debts, the ECB is discouraging them from helping themselves.
It has been suggested by analysts that Stark’s departure from the European Central Bank could be evidence of a divide in opinions between its council members which could have damaging consequences for the eurozone economy.

The fall in shares at the end of trading yesterday closed another week of unpredictable markets whereby share costs have been up and down continuously. Leading the falls were bank shares, a result of the doubts held by investors as to their vulnerability to bad debt. However, the level of lending between banks is at its highest since 2009, which implies that they have trust in each other. Despite this fact, Barclays dropped by 9.4% and RBS by 5.4% in the UK, Societe Generale in France fell by 7.8% and the Deutsche Bank in Germany by 7%. Further, the euro fell by 1.6% against the US dollar bringing it to its lowest exchange rate in six months.

Leading economies have met to discuss what action must be taken to revive the faultering global economy but as yet it is unknown whether any decisions have been made.

About The Author

Lee Murphy

MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.

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