European finance ministers voiced concern yesterday as stock markets spooked by recession fear bled for a second day with scant regard for assurances that Europe would weather a storm blowing from the US.
The chairman of the eurozone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said the sell-off was partly irrational, while Spanish Economy Minister Pedro Solbes said everyone was concerned by the direction of markets.
"When financial markets act irrationally, and are driven by herd behaviour, when stock markets demonstrate short-termism, there is no reason for finance ministers to do the same," Mr Juncker told reporters on arriving for yesterday's talks. Other EU ministers sought to play down the impact on Europe. "Even if the US goes into recession ... it's not a tragedy in itself," French Economy Minister Christine Lagarde said.
She urged calm despite what she called a brutal correction in markets, as Asian shares skidded lower and set the scene for more trouble in Europe, where Monday's share sell-off generated the biggest one-day drop since the attacks of September 11, 2001. Sixty per cent of French exports went to the rest of the eurozone and just eight per cent to the US, Ms Lagarde said. "It's not because things are in a spin that we must lose our heads," she told Europe 1 radio. Ms Lagarde attended regular talks among the finance ministers from the €15 currency nations on Monday, a meeting widened yesterday to those from the rest of the 27-country. European Economic and Monetary Affairs Commissioner Joaquin Almunia called for a sense of perspective.
"It's not about global recession," he said on arrival for yesterday's talks. "It's about a risk of a US recession, which has created this situation on the markets." Following Monday's talks, ministers acknowledged that Europe was no longer ruling out a US recession but could withstand it without sliding into a downturn too.
"The economic situation in the US is in no way comparable with that in Europe or the eurozone," Mr Juncker told a late-night news conference after Monday's meeting. "We feel comfortable with our economic situation at the moment. The economic situation in Europe seems to be uncoupled from the situation in the US".
European Central Bank chief Jean-Claude Trichet and International Monetary Fund boss Dominique Strauss-Kahn attended the talks too but did not comment on arrival yesterday. ECB executive board member Juergen Stark echoed calls for composure. "The markets are very nervous. They get new information every day and are very sensitive to it, perhaps excessively so," Mr Stark told Germany's Deutschlandfunk radio.
"This high volatility that we see is certainly not helpful but on the other hand, one should not exaggerate events."