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U.S. credit crunch ensnares Britain
LONDON -- As she waited in line here this week to pull her money out of Britain's Northern Rock bank, Helen Levenson asked, "What's the saying? If the U.S. sneezes, Britain catches a cold?"
Levenson, 71, a retired London secretary who once worked on New York's Wall Street, is proof that the crisis in the USA's subprime home-lending business has turned out to be highly contagious.
A credit crunch, sparked by the subprime crisis, prompted depositors such as Levenson to make the first run on a British bank in a generation, developers of London's tallest skyscraper to postpone construction plans and economists to warn that economic growth will shrink.
Effects of the credit crunch are being felt elsewhere on this side of the Atlantic.
The Dutch government says it could knock 0.75 of a percentage point off its economic output next year. And the governor of the Bank of Spain, Miguel Ángel Ordóñez, has had to reassure Parliament that the nation's financial system is "immensely solid," despite a drop in the share prices of banks and construction firms tied to a deflating property bubble.
But Britain appears more susceptible than most of Europe to the crunch, many economists warn. And some, including former U.S. Fed chairman Alan Greenspan, say that Britons could be more vulnerable than Americans.
"It might be fair to argue that Britain is in a worse position than the U.S.," says Adam Slater of Oxford Economics, a British consulting and forecasting firm.
Like the USA, access to cheap credit has fueled Britain's economic growth, which has been unprecedented in the last decade. It's run at a 3% clip in recent years.
Capital from the developing world has poured into London's banks. London's exchanges have become a favorite place for many of the globe's start-up businesses to raise money.
The city's financial sector accounted for a third of the rise in economic growth in the first half of this year.
Financiers pocketed $18 billion in bonuses from March to November, the economics firm Centre for Economics and Business Research estimates.
Consumer spending also has risen. Britain's housing market has boomed, and at a higher rate than in the USA. Prices have soared in the last 10 years.
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