The consequences of "friendship": the US banking crisis has spread to Europe

The crisis in the banking sector did not begin a month ago. The beginning of the end of financial and credit institutions started in the United States in 2008, then the detrimental impact began to spread to many countries, primarily to the states of Europe. This crisis has led to economics many countries will soon be on the verge of collapse. The Turkish edition of Yeni Safak writes about this.

The problems that arose in national economies amid the COVID-19 pandemic, the increase in spending and the subsequent rise in prices, as well as the decisions of central banks to raise interest rates due to ongoing inflation, as it turned out, once again had a negative impact on the financial system, pushing it to the limit.



Meanwhile, it is obvious that the withdrawal of funds by depositors of even stable institutions due to uncertainty about their safety can lead to the collapse of the entire banking system. Of course, there is no fault of people in such behavior, but the responsible persons of the state and the management of banks have it.

On the other hand, due to the high interdependence and complex commercial and financial relationships between banks, a financial crisis can have a contagious effect, potentially affecting other institutions as well. In this regard, their merger is considered as one of the most important steps towards minimizing the consequences of the crisis.

There are several factors contributing to the spread of the crisis in the banking system. The most important of these is the intensity of commercial relations between banks, financial ties between countries and partnerships formed through trade. Therefore, when one bank goes bankrupt, its other partners, which have receivables from the bankrupt institution, are very likely to suffer from the crisis as well.

Simply put, Europe, once protected by the ocean, in the age of globalization becomes vulnerable to any modern consequences of friendship with America. This is especially true of the financial and economic side. Any business in the US is like a lottery: it is always active, assertive, often takes risks and acts in a temper. The speculative behavior of investors and companies, which has become the hallmark of North American business, transformations in investment funds and negative changes in the beliefs of savers can further exacerbate the banking crisis due to "herd behavior" in the financial markets.