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The losers and the winners in the grim global lottery of chaos and despair; The turmoil in the financial markets has rocked national economies around the world. These are some of the biggest losers in the crisis - and some of the countries that have escaped relatively unscathed so far.

United States

America is at the centre of the whirlwind that has smashed through the international money markets, causing share prices to crash and driving banks to the wall.

The roots of the global crisis are complicated but analysts agree that the reckless offering of sub-prime mortgages to people with poor credit records in the US is partly to blame.

These mortgages were repackaged as bonds and sold on to financial institutions.

When hundreds of thousands of sub-prime US homeowners defaulted on their repayments, credit dried up and the banks that had bought the bonds were forced to write off billions of dollars.

Things are looking bleak in America - the Lehman Brothers investment bank was declared bankrupt and other banks have had to be rescued, stock market falls have broken records and employers are cutting jobs across the country.

The US authorities have responded by slashing interest rates and passingaEUR700bnbank bailout, but it remains to be seen whether this is enough.

Iceland

Tiny Iceland-with a population of 313,000, it is about the size of Coventry - is one of the countries worst affected by the financial turmoil.

Prime Minister Geir Haarde warned this week that the island faced the "very real danger" of national bankruptcy if it was sucked into the"whirlpool" threatening global markets.

But it is not just Icelanders who should be worried about this possibility - as Chancellor Alistair Darling recognised when he promised to guarantee the savings of Britons with money in the troubled Icesave online bank.

Iceland's government yesterday nationalised Landsbanki, Icesave's parent company, after trading of shares in the six biggest banks had to be suspended and its currency lost a quarter of its value against the euro.

New emergency legislation also gave the country's financial regulator the power to dictate banks' operations.

Described as the "canary in the coal mine" of the international crisis, Iceland's economyhas been particularly exposed because of its dominance by financial institutions built on foreign debt.

Germany

In the early stages of the recent turbulence there was a widespread perception in many European capitals that the credit crunch was an Anglo-American problem.

Germany, Europe's biggest economy, had comparatively little consumer or corporate debt and should have been in a strong position to ride out the crisis.

But over the weekend Berlin had to provide a 50 billion euro bailout for the country's second-largest mortgage lender, Hypo Real Estate.

More significantly, German Chancellor Angela Merkel also said no citizen should fear for the safety of their savings - heaping pressure on governments across Europe to provide similar promises.

Mr Darling later insisted that her announcement was a "political declaration" of intent rather than a "legally binding" guarantee, but the confusion demonstrated how jumpy both politicians and the markets remain.

Mrs Merkel has said every country must live up to its own responsibilities and voiced opposition to an EU-wide bailout fund like that passed in the US.

Ireland

One of the EU's most remarkable success stories over the past decade, the "Celtic Tiger" was officially the first eurozone country to fall into recession.

Ireland boomed from the mid-1990s, growing at an average rate of over 8%a year from 1993 to 2000, and attracting skilled migrants and investment from companies like Intel and Microsoft.

But on September 25 official statistics confirmed that the economy contracted by 1% in the first half of this year.

Ireland's Central Bank blamed the country's reliance onconstruction, the turbulence in international markets, high food and energy prices and difficult trading conditions.

Last week, the Irish government signed into law a 400 billion euro rescue package that guaranteed all deposits and debts in six of the country's largest banks.

Critics of the move said it gave Irish banks an unfair advantage over their foreign competitors - and pointed out that the combined liabilities of the institutions totalled more than double Ireland's annual GDP.

China

China's dramatic growth in recent years has seen it transformed from an agricultural backwater to the world's fourth largest economy.

It expanded at a rate of 11.9%in 2007, and while the crisis is expected to slow this blistering pace, the IMF still predicts it will grow by 9.7% this year.

But China is not immune from the effects of the turmoil in international markets. The Asian giant's economy is heavily dependent on exports to rich countries like the US and has been hit by rising energy prices.

The Chinese government is clearly worried - after leaving interest rates untouched for over six years, it has now cut them twice in less than a month.

But there are many reasons for Beijing to feel quietly optimisticas it faces the financial storm, not least its huge reservoir of foreign currency reserves.

Australia

Australia's economic fate is closely tied to that of China.

Official figures show that the country has recorded 17 consecutive years of growth since 1992, at an average of 3.3% a year.

This record - very impressive for a developed nation-would not have been possible without China's appetite for minerals.

Australia is still expected to expand by 2.75%in 2008-09, but Canberra is concerned about the possible impact of a slowdown in Asia's powerhouse economies.

The central bank slashed the official interest rate by 1% yesterday, the largest cut since 1992.

Prime Minister Kevin Rudd warned of "tough times ahead".

CAPTION(S):

PICTURE OF PANIC: Traders at work in the eurodollar trading pit in Chicago yesterday PICTURE: AP/MSpencer Green; PICTURE OF DESPAIR: Glum brokers in Frankfurt, Germany; WAITING FOR THE WORST: New York Stock Exchange traders
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Publication:Western Mail (Cardiff, Wales)
Date:Oct 9, 2008
Words:924
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