JOHN SPECK, London | Wednesday
THE destruction of the World Trade Center in New York on Tuesday effectively paralysed the US financial system but on Wednesday the rest of the global capitalist system fought huge headaches and carried on.
”I do not thing New York being closed will make any real difference to the world economy. People can trade in many centres around the world,” said Andrew Oswald, economics professor at Warwick University.
”But confidence is the main victim. Frightened people do not spend money and that could mean fewer jobs,” Oswald added.
As the world awoke to the full horror of the terrorist attack on US economic and military power, major financial markets across the globe were opening without major glitches.
However, air travel was counting the cost of entering a new-age where civilian aircraft can double as deadly missiles.
Asian and European airlines cancelled flights to the United States, while those already in the air either returned or were diverted to Canada, stranding thousands of passengers.
The Geneva-based International Air Transport Association estimated that with 4_000 commercial airliners grounded in America, about one-third of the world’s fleet is idle.
Many of the world’s top business chiefs were stranded without a flight. Even US Treasury Secretary Paul O’Neill was stranded in Japan, where he was on a visit at the time of the carnage back home.
Some carriers, including British Airways have also suspended flights to the Middle East and other destinations.
”We have been able to get 2_000 hotel beds at short notice,” said a representative for Heathrow airport, West of London. ”We had a further problem of where to park all the aircraft but we have managed that.”
US airlines were planning to resume reduced services from 1600 GMT after the first ever closure of US airports.
Telecommunications systems were also under pressure, with Asian phone lines to the United States flooded as people tried to contact relatives.
”My husband tried hard last night to call his sister, whose family live in New Jersey, ” said one woman in Seoul. ”He failed over and over again and finally reached her this morning.”
Central banks worldwide took swift action on Wednesday to keep financial markets working, pumping in additional money where needed. The Bank of Japan reacted quickly to soothe fears of a global gridlock, and was swiftly followed by other banks.
Although there were no reports of new violence in the United States or Europe, sporadic bomb scares forced evacuations of office blocks in London and Frankfurt – Europe’s two main financial centres.
President George W. Bush said in a televised address to the US on Tuesday that the world’s richest economy would carry on despite what he called ”evil, despicable acts of terror”.
”Our financial institutions remain strong and the American economy will be open for business as well,” Bush said.
Stock exchanges across Europe were open for business, as the key benchmarks of global capitalism flickered back to life. But trading in US shares was suspended on Instinet, the Deutsche Boerse and Euronext.
”The German government, in close contact with European partners, the European Central Bank, the Bundesbank and in cooperation with the U.S. government, will ensure the orderly functioning of…markets,” German Finance Minister Hans Eichel said in a statement.
But the international financial markets association, the ACI, said it planned to ask banks to desist from unnecessary trading in the wake of the attacks.
Heavy trading would place extra demands on markets and could trigger a panic response, economists warned.
”I think we should refrain a little bit from strong trading activities,” said Heering Ligthart, president of the Association Cambiste Internationale.
However, regulators said banks had contingency plans for disasters and disruptions. These include having a back-up computer system and a fully-equipped albeit smaller trading room in an alternative location.
On the streets, workers in London’s financial district filed to work in stunned silence, sensing the world they work in has changed forever, with terrorist gangs able to destroy in a second what a nation took generations to build.
”Lots of people I work with have colleagues in our US offices and they were stunned. Sheer horror. It’s the not knowing that is the difficult thing,” said 25-year-old Lorna Doodson, of major US investment bank Morgan Stanley.
Others feared the world’s economic system had been dealt a blow which would reverberate for years.
”This is going to bring into question the fundamental stability of the capitalist world, especially a market-based society,” said Kirit Shah, head of research at Japanese bank Sanwa International in London.
While workers trooped back to work, the terror attacks threaten to have a major impact on consumer confidence and could help send the world economy sliding towards recession.
News that Federal Reserve Chairman Alan Greenspan would return to the United States from Switzerland on Wednesday also fanned speculation industrialised nations could coordinate a round of interest rate cuts to calm fears of recession.
”The attacks in the United States are likely to have an adverse impact on consumer and business confidence, deepening the economic downturn and postponing recovery,” banking powerhouse Goldman Sachs said in a research note.
But there was a glimmer of hope from the oil price, which dipped back, quelling concern over a renewed surge in global inflation which would crush global economic growth.
Oil prices fell on Wednesday after Opec gave reassurances over the security of world supplies. London Brent blend futures subsided 51 cents to $28,55 a barrel.
Transport systems in New York were limping on Wednesday with chaos on the underground system, while in other major capitals across the world they were running relatively smoothly. – Reuters