Where It Isn't

The European money market is running out of money. Items:

> In West Germany, credit is so tight that Frankfurt last week canceled plans to build a new subway system, while Duesseldorf was forced to call off construction of a new city hall, auditorium and athletic stadium. The credit squeeze is even tougher on private industry. Corporations with Triple-A credit ratings are offering 9% interest and are still unable to raise the money they need for capital expansion. Thus, capital investment this year will drop to its lowest level since World War II. Order backlogs are falling, and the rise in productivity is only half of what it was last year.

> In Switzerland, commercial banks last month raised the prime interest rate from 5% to 6% , the first such increase since 1937 in the frugal little country.

> In Sweden, the shortage of loan funds is such that high-priority apartment construction in Stockholm has been cut back 40%, and the average wait for an apartment is now ten years.

> In Norway, big and small businesses this summer are getting bleak answers when they make loan applications as longtime bank customers: "Sorry, but we don't have money."

> In Britain, banks are now within 1%, or $47,500,000, of the ceiling on the amount of money that they can lend; many banks are calling some current loans. At the same time, British corporations will have to scrape up around $1.5 billion by year's end to pay taxes on their dividend payments as well as the new selective employment tax.

Though effects of the credit crisis vary from country to country, Europeans are in general agreement about what has caused it. "The center of the disturbance," says London's Financial Times, "is undoubtedly the U.S." Caught in their own credit squeeze at home, U.S. corporations have been raising more and more money abroad. They accounted for 40% of new bond issues floated in European markets this year, and are expected to raise about $900 million in all. Meanwhile, U.S. bank branches abroad have pulled about $2 billion in lendable funds out of the money market and have sent it Stateside to headquarters. All of which leaves little for Europeans to borrow in their own money market.

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