Dangerous game of catch-up continues

THE Government was forced to act decisively again yesterday to support the money markets as its dangerous game of catch-up continued in the wake of the global financial crisis.

Events are still unfolding at such an erratic pace that decisions to pump in billions of extra cash are having to be made on the hoof.

As we have seen recently, failure to act quickly can have devastating consequences for what appeared to have been secure and safe institutions. It is as though the Government is trying to control a raging forest fire which can lurch in any direction with little warning.

What strikes many ordinary mortals, who are not experts on either politics or high finance, is how helpless governments are to control things when the free market is in freefall. They are being dragged along like the rest of us and can only react as best they can to events.

In Europe, in particular, cohesion and a commonsense of purpose is required to avoid one country’s actions impacting adversely on neighbours. We are all supposed to be in the European Union, after all, yet Germany’s pledges to depositors appeared to have caught Downing Street on the hop. This in turn forced the government to step into the market to steady frayed nerves. Many will now start to think that this vicious circle of action and reaction will not end until the government underwrites savings in every bank in the country.

The era of “irresponsibility”, as Gordon Brown described it, is well and truly over for the financial sector and regulation to control the worst excesses must follow. Until then, all the government can do is continue to keep its financial life support machine running – the alternative being too awful to contemplate.