Emergency Measures as Worldwide Markets Dip

The 120,000 Dutch savers who have deposits with the troubled Icelandic bank of Icesave are facing uncertainty as the Dutch government has expressed reluctance to guarantee their savings.

    Dutch Finance Minister Wouter Bos said Wednesday that the government does not want to fully guarantee the savings of Dutch consumers with Icesave if Iceland fails to meet its obligations under the deposit guarantee scheme, Dutch daily De Volkskrant reported Thursday.

    "If I advance the money there is no longer any pressure on Iceland's government," he was quoted as saying during a Dutch parliamentary debate on the nationalization of Fortis and ABN Amro.

There was no mistaking the urgency of official action. Across the world, banks wobbled as they struggled to tap money markets for short-term loans. “A growing number of banks are being subjected to a wholesale version of a bank run, with access to [wholesale funding] evaporating in a matter of days, if not hours,” warned analysts at Citigroup.

The Government's Financial Services Authority now has control of all three of the country's major banks. The other two, Landsbanki and Glitnir, are in receivership.

The authority said the takeovers were necessary to ensure the "continued orderly operation of domestic banking and the safety of domestic deposits".

However, no such security was guaranteed to international customers of Iceland's banks, sparking a diplomatic row between the tiny nation and Britain. Iceland has refused to refund the deposits of Britons in its stricken banks.

Sigurdur Einarsson, the bank's chairman, said the seizure of the UK arm directly led to the collapse of the entire group. "It is very sad, unfortunate and disappointing," he said.

Battered by a financial storm which has claimed a clutch of the world's biggest banks, the north Atlantic island's prime minister has warned of the risk of national bankruptcy, while the central bank tried then abandoned attempts to prop up the currency. But Prime Minister Geir Haarde said he had not asked for help from the International Monetary Fund, which has sent a delegation to Reykjavik.

The 37.1% drop suffered by the Standard & Poor's 500 index since hitting an all-time high of 1565.15 on Oct. 9, 2007, dwarfs the 31.5% average loss in the 10 bear markets in the post-World War II era, S&P says.

On Wall Street, the Dow Jones was down 0.43% despite opening higher. 

European shares followed their US counterparts lower, with the FTSE 100 ending down 1.2% and France's Cac 40 down 1.55% by the close of trade.

Thursday marks a year to the day since the Dow Jones Industrial Average’s leap to a record close at 14,164.53. Of course, since then, the course the market has taken has been drearily downward, having lost a whopping 34.6% since Oct. 9 last, including losses amounting to 15% in just the last five trading sessions.

Right now, the stock market is limping through its third-worst bear market since the mid-1940s. Stocks have already suffered more pain than they did in the 1987 bear market, which included a record 22.6% one-day Dow crash.

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