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The Fragility of Hope

  • Stephanie Flanders
  • 2 Mar 09, 04:19 PM GMT

If you were looking for one headline to fit today's many and various market declines, it would be the Fragility of Hope.

So you thought HSBC was one bank to have come out of the past year pretty well? Turns out that 62% and they need to raise 拢12.5bn.

Or maybe you hoped that three government bailouts for AIG would be enough? Today the needy US insurance giant unveiled a for the last three months of 2008, and bailout number four: $30bn from the US Treasury to add to the $150bn it's already had. (Some say it's the third bailout, but I'm including the emergency support from the US central bank in September and October as numbers one and two.)

Banks led the falls in markets across Europe, but there was some bad news from the real economy as well. The Markit European Purchasing Managers Index was considered a possible green shoot when it rose in January. Today, we found out that it sunk back into the ground in February. Across the Continent, manufacturing is still getting it in the neck.

Finally, there was the hope that European leaders would come up with an ambitious plan for the Central and Eastern European economies at their yesterday.

I didn't think anyone was seriously expecting the EU to take the initiative on this (see my last post). But apparently they were. The zloty and forint fell by around 2% against the euro this morning, and the Czech currency was down sharply as well.

When the history of this crisis is written, I suspect the first few months of 2009 will go down as the time when the financial and economic sides of the crisis came together - and investors saw the truly global dimensions of the problem for the first time.

The global economic dominoes are starting to fall, even as individual governments still fumble for a solution to the first, financial sector phase of the crunch.

Gordon Brown heads to Washington tonight to plot a coordinated global response to the crisis with President Obama. With less than two weeks to go before the G20 finance ministers meet to prepare for the London Summit in early April, the prime minister wants to make sure they have something to say.

You can understand why. The G20 summit is the prime minister's last and best chance of .

But today's news from AIG, coupled with the hurried support packages for Citi, RBS and (probably) Lloyds, is a reminder to investors everywhere that a global solution is some way off. Save the world? We haven't even saved the banks.

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