A LOOK AT WHAT’S HAPPENING ACROSS EUROPE UK
 The Financial Services Authority (FSA) has conceded it failed to properly regulate Northern Rock, now in public administration, despite concerns over its business model ahead of the run on the bank in September 2007. In a report released on 26 March, the FSA admitted it met with Northern Rock management just eight times  between January 2005 and September 2007 against an average of 74 times for other British banks. Concerns continue to mount over the effectiveness of Britain’s tripartite financial regulatory system, with critics saying the FSA’s consumer protection role obscures its responsibility for systemic stability. Spain
 The Socialist Party of Prime Minister José Luis Rodriguez Zapatero (below) won a second term in March’s elections, securing 43.6% of the vote to the Popular Party’s 40.1%. But, it remains seven seats short of an absolute majority,  meaning it will have to rely on the help of small parties to push its programme through. This is expected to be concerned with the deteriorating economy, whose downturn has been exacerbated by a property market crisis: January sales were down 27% year-onyear, and construction has ground to a halt.
Iceland
 As fears grew about the impact of the global credit crunch on Europe’s smallest and most exposed economy, the Central Bank raised interest rates by 1.5% to 15% on 25 March to stabilise the Krona. It also launched a ISK10bn (€83m) sale of short-term bonds to boost domestic liquidity. Iceland’s currency has fallen by 20% against the euro since the start of the year as fears have grown over high inflation – currently around 7% against a target 2.5% – and a current account deficit of 16%.
The EU
 With US policymakers admitting the US is in recession, Europe gave mixed messages about its own economic health. France and Germany reported an uptick in business climate  confidence surveys while the ECB’s interventions so far seem to have stopped the credit crunch impacting on much of the eurozone. However, industrial output in the first quarter of 2008 was at its lowest since quarter two of 2005, eurozone inflation is at a 14-year high of 3.3%, while a strong euro is affecting exports to noneurozone markets.
Cyprus
 New Greek-Cypriot president, Demetris Christofias, and his Turkish-Cypriot counterpart, Mehmet Ali Talat, initiated a new round of formal meetings, which observers say raises the prospect of a solution to the 44-year-old Cyprus problem in the coming months. Christofias seems determined to find common ground with Talat, who favours a reunited Cyprus. In a move aimed at bolstering confidence, both agreed to the opening in April of a new crossing point at Ledra Street, central Nicosia’s main shopping street.
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