With banks dropping like flies here in the U.S., one must accept that this shake-up cannot be contained within U.S. borders.
Indeed, banks in Western Europe are already following U.S. institutions into the dark abyss, and now the European Union must decide if some “bailouts” will be allowed. For example, the EU is now reviewing its decision to allow a $7 billion bailout of German bank West LB.
And some regions are looking to preemptively bail out its banks.
Ireland has just announced that it will guarantee all deposits, bonds and debts for the country’s six largest banks for the next two years.
It’s a controversial decision that some say will give these Irish banks - with international branches - an edge over other banks. But it’s also in line with what the European Commission has been wanting… Well, sort of.
The EC wants banks to, in essence, hoard cash. Like a rainy day fund, just for times like these.
According to the Commission, banks should put away more cash in order to be able to cover its riskier investments.
Of course, that makes sense, but I don’t think a lot of banks will be able to pull that off in this type of environment. In fact, this may have a negative effect. If banks take more liquidity out of the markets, there will be less money to lend, and less revenue for the bottom line.
So should governments step in and foot the bill, or should the responsibility rest solely on the shoulders of the financial institutions?
Two countries, three trains, two trams, and two buses later and I’ve arrived at my final destination on this tour: Budapest.
From the tiny town of Tatranska Lomnica, I made my way to Bratislava, the capital of Slovakia. It’s not the best place for photos, though there are several palaces that are camera worthy, and the main square, which is surrounded by embassies, is a nice place to start your shopping.
Bratislava is fairly cosmopolitan, though. There are plenty of international businesses, like Ernst and Young (Private). It’s also home to the stock exchange, the BSSE.
And, like Krakow, there’s a lot of construction going on. As I told you last time, growth has not been checked so you’ve got unusual buildings thrown up side by side with historical sites. Take a look at the panoramic photo of the city.
Lots of concrete…
And cranes.
The city has quite a ways to go, though, but it’s getting a lot of influence from its surrounding countries. Bratislava is a mere three hours from Vienna, and is right on the border with the Czech Republic, too. It’s also 200 kilometers (124 miles) from Budapest, which is by far the largest city on my trip.
In my last post, I noted that Krakow was “under construction.” Well, I’d like to extend that to more than just the city. There was barely a road I travelled on that wasn’t coned off and rerouted for some kind of improvement.
And one of the reasons Poland is spending so much time updating its infrastructure and roads is to become more attractive to foreign investors.
On one stretch of highway, I saw two major manufacturing plants: BASF (BAS:Frankfurt) and Daewoo (004550:Korea).
Interestingly, the Slovak roads are in much better condition. Investment is still going strong, though, and one major private investor is expanding a huge resort here in the High Tatras, in the Pieniny National Park.
Now, that brings up an interesting point to growing so quickly…
And sometimes, fast growth comes at the cost of quality. Take this picture of the Czorsztyn-Niedzica-Sromowce Complex for example. This is the dam provides only half the electricity it could have had it been built right. It was finished in 1994 and has a capacity of 160 million kWh of generation a year. That’s less than what Rhode Island uses in a month…
So, not all the rules are being followed. Even my guide book has a little note on it. In talking about Slovakia’s capital, Bratislava, the Lonely Planet says:
As post-EU-membership investment pours in, the whir of construction equipment in all quarters of Slovakia’s capital is growing… There’s something a bit reckless about the development, though. Zoning laws are largely ignored and and odd mix of antireform-minded parties took control of the parliament in June 2006.
But Slovakia is certainly breaking away from the past, and it’s financial markets are trying to do the same. The SAX Index on the Bratislava Stock Exchange (BSSE) has climbed 3.54% in August, year over year.
Krakow Under Construction
The trip was long and draining from Teplice mad Metuji to Krakow. I was stuffed on a bus winding through picturesque little towns for six hours.
Yes, the vegetable gardens outside of every home are cute and quaint, but six hours was more than enough. I have to say, though, the farmland on this trip was really beautiful. We’re talking about corn, sprouts, and even sunflowers growing in neat patches that stretched far and wide.
The green was even more rewarding in the drizzling, misty grey sky.
Our first stop in Poland was the infamous Auschwitz concentration camp. Quite a sobering site, and I will freely admit that I cried seeing the 80,000 shoes piled in rooms, and the two tons of human hair that would have been used to make textiles.
It is something everyone should see at least once in their lives.
But I was really interested to learn that after the camp was liberated, some of the materials - like wood and stone - were taken by the local population moving back into the area whose villages were destroyed when the Germans swept through.
At least, they took the material from the buildings the Nazis didn’t get a chance to burn.
It would seem that the Poles (who were actually the first persecuted by the Nazis at Auschwitz) are good at rebuilding.
As I walked around Krakow today, I couldn’t get away from construction. Everything is being updated or reconstructed, from old churches to new tramways. Everything is loud and noisy and parts of sidewalks are closed to pedestrians.
To me, this is good to see. Over the past several years, Poland has been reducing its unemployment rate.
