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Coincidence of two destructive factors - the financial crisis, the biggest one during the last several decades, and drastic price fall on raw materials and commodities markets - have created an unprecedented danger for the world economy and global financial architecture. Ignoring the problem by hiding behind the terminology on insufficient integration of the Ukrainian economy into the world processes is a faulty strategy that can cause isolation of the country's financial system.
It is obvious that any government in the world failed to predict future consequences of latent manifestations of the initial stage of the crisis. Sporadic plans to save separate financial institutions (AIG, Fannie Mae, Freddie Mac, Fortis) by their partial nationalization became the proof for that and a refusal to interfere into the catastrophic processes of other financial giants evidenced that too. Absence of explicit mechanism, which would have been understandable for the markets, for supporting liquidity of financial structures triggered a new crisis, a crisis of trust that paralyzed interbank lending and provoked a drastic fall of the stock markets.
Steps taken by western governments to save their financial markets must become an example for domestic regulators in terms of stabilization of the economic situation in the country. Our financial system does not operate with high-risk instruments and does not have toxic assets; however, it is extremely vulnerable to world fluctuations since it is sufficiently integrated into the global financial markets. For this very reason, the decisions that must be taken by regulators have to coincide with global financial solutions and not repeat mistakes of the past years.
It will not be possible to tackle the problem of the crisis of trust on stock and money markets by applying forbidding measures. Now, as never before, the markets need new mechanisms for resolving problems and the market players need to understand the mechanisms well and adequately perceive government plans to stabilize the situation. Only under such conditions the reaction of the financial community will be positive. The rules have to be equal for everyone. Priority support of 'the selected ones' will not help to avoid a crisis, but will only worsen the situation on the interbank lending market. Expert communities must not be isolated, but on the contrary, they have to be involved in the discussion of a situation: only market players are capable to evaluate practical aspects of application of these or other measures and a consensus between business and authorities is extremely important in crisis situations.
The difficulty lies, not in the new ideas, nut in escaping the old ones.
John Keynes
This crisis, which has been called epochal and catastrophic by journalists inclined to making passionate expressions, can positively affect Ukraine's economy, despite everything else. Absolutely new world financial models are being created, the governments are uniting their efforts by developing joint plans for stabilization and new models of national-private partnership and market instruments are appearing. The speed of making important state decisions is becoming almost the one of a lightning and this transfers dynamics, inherent to financial markets, into bodies of authority. Right now the authorities and business in Ukraine have a unique chance to become a constituent of the new world financial hierarchy by mastering and accepting new mechanisms of regulation and development of the markets. The age of our financial system will help us to refuse easier from old mechanisms noted by great John Keynes.
Alina Kovylina, Chief Executive Officer of CJSC Asset Management Company Slavutich-Invest, Master in European political economy of the London School of Economics and Political Science
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