The global economic turndown and the European Union
The first symptoms of the crisis resulting from the US mortgage subprime breakdown appeared in Europe in August 2007. The collapse of the US mortgage market caused write-downs and credit losses among some of the largest European banks. But the full extent of the serious problems in the world economy appeared in autumn 2008 together with the outbreak of a domino effect generated by so-called "toxic assets" in some of the main European banks. Now, more than a year later we have to deal with the steepest drop in global economic activity and trade since World War II. It is worth mentioning that the importance of the banking system with regard to supporting the economies with funding is much stronger in Europe than in the US. Since the 19th century there has been a strong connection between banks and other industries in Europe. It wasn't and it isn't unusual for company directors to be board members of many important banks and vice versa. This tradition enabled the best allocation of capital and guaranteed financing for particular activities in particular industries, as well as long-term investment. As far as financially supporting the economy was concerned, in a normal and predictable situation, along with the relative weakness of the stock market as a source of financing, such an arrangement of the banking system played a positive role. Unfortunately, the present crisis and its impact on the banking system, as well as the global shortage of capital have proven to be dangerous for EU economies. European corporations are left with just a few financing alternatives, whereas in the US corporations are more financially dependent on stock markets. Thus, the most important factor in the recovery of the EU economies lies in the restoration and improved credit ability of the EU banking system. (fragment of text)
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