Five years of gloom and more to come

Five years ago, the global credit crunch triggered a rash of bank bail-outs and ushered in the biggest slump since the Great Depression. So, what's changed since then?

Last Thursday marked the fifth anniversary of the start of the global credit crunch. In August 2007 the European Central Bank (ECB) was forced to inject an emergency €95bn into the money markets as European banks suddenly found they couldn't borrow short-term from other banks. This liquidity crisis was triggered by their exposure to the American subprime mortgage market, which was by then on the verge of collapse as borrowers defaulted.

In Britain, the run on Northern Rock bank in September 2007 soon followed as savers panicked about the safety of their deposits. As mortgage-related defaults rose sharply, a year later American investment bank Lehman Brothers went bankrupt. The following six months then "saw the biggest slump since the Great Depression", says Larry Elliott in The Guardian. Governments bailed out the banks, but "wrecked their own finances in the process". Indeed, by mid-2009, both consumers and governments "had too much debt". Little has changed since.

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