The Rot Spreads

Select ratingGive it 1/5Give it 2/5Give it 3/5Give it 4/5Give it 5/5

Not a good week for the Europeans. Banks in Belgium (Fortis), the U.K. (Bradford and Bingley), Germany (Hypo Real Estate) and France (Dexia) all needed government bailouts. Economic activity continued to deteriorate throughout the region, and economic confidence in the Eurozone countries reached its lowest level in seven years. By week’s end, even central bankers were forced to acknowledge that the game is over: European Central Bank head Jean Claude Trichet admitted his “inflation above all else” policy is dead, and interest rates will soon be cut.

Welcome to the global financial crisis.

But, not yet to the global bailout. Even as Congress passed the fattened Bush bailout (which is open to any institutions with significant U.S. business), the first attempt at a European counterpart failed. French President Nicolas Sarkozy had hoped to use a weekend summit with the Germans, Italians and British to get agreement on a 300 billion euro fund to bail out European financial institutions. However, German Chancellor Angela Merkel effectively vetoed the idea, at least for the time being.

One ironic footnote: apparently, some Germans like bailouts. The Financial Times today reported that German carmakers are pushing Washington for a slice of the $25 billion package authorized last week by Congress. The auto industry bailout is disguised as an effort to promote green technology, so Daimler’s CEO, Dieter Zetsche has unleashed his lobbyists on the Energy Department to get German carmakers included.