Central banks release more funds

The extra funds are aimed at easing banking sector woes

Global central banks are pumping billions of dollars of extra funds into money markets in a co-ordinated move to lift the amount of credit available.

The move is the fourth such joint effort since December last year. It will see the US Federal Reserve inject a further $180bn (£99bn).

The Bank of England is releasing $40bn, while the European Central Bank is to provide $55bn.

The Bank of Japan and Swiss National Bank have announced similar moves.

‘Appropriate steps’

“These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets,” said the Bank of England.

“The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.”

It does help to release some of those immediate tensions that have been building up in the money market Ian Stannard, currency strategist, BNP Paribas

The central banks of South Korea, India, Canada and Australia have also released extra funds.

The co-ordinated move comes after four days of almost unprecedented turmoil in the global financial industry.

Firstly, US giant Lehman Brothers filed for bankruptcy protection, while compatriot Merrill Lynch lost its independence in a rescue takeover by Bank of America.

The US government has also had to bail-out insurance giant AIG, while in the UK, thousands of jobs are predicted to go at banking group HBOS following its sale to rival Lloyds TSB.

Major problem

Analysts said the latest move by the central banks should help to ease immediate fears.

“Obviously it does not tackle the underlying root causes of the problem, but it does help to release some of those immediate tensions that have been building up in the money market,” said Ian Stannard, senior currency strategist at BNP Paribas.

Koichi Haji, chief economist at NLI Research in Tokyo, said the co-ordinated move “shows how serious the problem has become”.

“I think the root cause was letting Lehman fail,” he said.

“That made investors reluctant to supply funds to their counterparts, particularly to the smaller banks.”

Hopes ride high on Zimbabwe deal

Morgan Tsvangirai may have persuaded Robert Mugabe to sign over some of his executive powers but Zimbabwe’s prime minister-designate now has a very short honeymoon period to prove himself.

The BBC is still operating under restrictions in Zimbabwe, but what reactions we have been able to gather show that large numbers of people believe Mr Tsvangarai can deliver and start the process of re-building a shattered economy.

It stands in stark contrast to the more sceptical assessment of many in the diplomatic community.

We want to see people no longer afraid to walk down the street with an MDC T-shirt – no longer afraid to look a policeman in the eye James McGee US ambassador to Zimbabwe

They want this deal to work, but the “vintage Mugabe” who blamed his country’s ills on former colonial powers during his post-deal speech, suggests a man locked in the past and unwilling to face up to the future.

As one diplomat said, the challenge will be to “turn what could be a trap for Morgan into an ambush for Mugabe” – a sentiment revealing deep concerns about just how committed the man who has run Zimbabwe for nearly three decades is to power-sharing.

‘We have to believe’

In a squatter camp on the edge of Harare, a man in his 20s who lost his job as a gardener when the money to pay him ran out, said they had no other choice but to have faith in this new beginning.

Zimbabwe’s hospitals are suffering because of the economic crisis

He is pinning his hopes on the new unity government delivering food, and a stable economic environment which would improve his chances of getting a job and restoring his dignity.

And young professionals, who spoke in secret locations away from the prying eyes of intelligence operatives, said they believed Mr Tsvangirai had the capacity to hold his ground against his former political foe.

Articulate and measured, young men from Zimbabwe’s Christian Student Association said Zimbabweans need the watchful eyes of the international community to monitor events in the coming months.

One implored potential donors to “believe in a deal which we have to believe in” if there is to be any hope of rehabilitating this once prosperous nation.

Culture of intimidation

We’ve only gleaned a partial picture.

With the security situation still precarious, it has been hard to gauge reaction in rural areas where Mr Mugabe has drawn much of his support.

MDC supporters believe their leader can deliver a stable economy

But there are without doubt people who are smarting. People who were in the pay of the party, whose lifestyle of political patronage is now under threat.

Intelligence and security chiefs were absent from Monday’s historic signing in ceremony.

Whether their boycott signals plans to undermine the deal is impossible to know at this early stage, but diplomats are monitoring the environment carefully.

Tangible signs that the culture of intimidation is being reversed will be one of the benchmarks they will use to determine if, and when, to deliver billions of dollars of life-saving aid.

As James McGee, the US ambassador to Zimbabwe, put it: “When we talk about respect for human rights we want to see people no longer afraid to walk down the street with an MDC T-shirt – no longer afraid to look a policeman in the eye… those are the little things that show there has been a change in attitude.”

Expectations high

Driving around the streets of Harare gives the impression of a benign capital, a place where the streets are paved and the buildings stand tall. But it is a facade.

Inside the hospitals there are shortages of medicine – many people have died from cholera recently, deprived of drugs.

Behind the facade of modern Harare there are acute shortages

And the banks are stuffed with worthless cash. It is not unusual to see plastic bags stuffed with notes that have no value, discarded on the street.

Expectations that this deal will begin to reverse some of this economic chaos are riding high.

Mr Tsvangirai’s first test will be his ability to secure key cabinet posts.

In particular in the finance portfolio, giving the MDC greater leverage over the economy, allowing the government to shape policies that restore property rights and market mechanisms back to Zimbabwe.

The next test will be getting food out to the desperate people who need it and clearing the red tape that prevents humanitarian agencies from distributing aid.

Food has been used by Mr Mugabe’s Zanu-PF party as a political cattle-prod – they’ve ensured it reaches friends, but withheld it from foes.

If the new prime minister can make real headway in distributing food to a country facing the threat of starvation, then he could reap a huge moral dividend which the international community may be willing to reward.

Like the power sharing deal in Kenya, this is a huge political experiment dependent on the personalities of the key players and the political will to change.

There is the potential for the whole thing to combust, a scenario which would see the end of Morgan Tsvangirai’s political career.

But optimists believe that Zimbabwe’s landmark pact, will be the catalyst that breathes new life into a broken country.

Indian floods cut off thousands

Half a million people in the Indian state of Bihar remain stranded in villages which have been devastated by massive flooding, officials say.

Correspondent reports chaotic scenes as soldiers try to reach those cut off and people attempt to scramble from rooftops into rescue boats.

With 1.2 million people homeless, India is struggling to cope with the crisis.

The flood waters are spreading to new areas, and conditions in relief camps are overcrowded and unsanitary.

The floods are known to have killed at least 75 people in Bihar but the death toll could climb once the situation in remote areas emerges.

Tens of thousands of people have also been displaced in neighboring Nepal where some of those who have lost their homes are camping under plastic sheets.

Disorganization

Visiting the Bageecha relief camp in Purnea, the BBC’s Sanjoy Majumder could find no camp co-ordinator or government official in charge of distributing aid.

Trucks and vans carrying relief material stood parked on the highway as volunteers waited to be organised.

Several tonnes of aid had arrived but the volunteers were not quite sure how to distribute it.

The situation was symptomatic of what was happening across Bihar’s flood-affected areas, our correspondent says.

The disaster began on 18 August when a dam burst on the Saptakoshi river in Nepal.

The Saptakoshi, which becomes the Kosi when it enters India, subsequently broke its banks in Bihar.

Officials in Nepal say hundreds of people there have been hit by illnesses such as diarrhoea and pneumonia and an estimated 50,000 are homeless.

They say nearly 1,000 houses have been completely destroyed. Power supplies and transport have been severely affected.

The costs to the economy are now estimated at one billion Nepalese rupees ($14.25m).

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