This week The Economist has a sobering article on the global impact of the credit crisis that contains pragmatic recommendations for government cooperation (easier said than done).

By some measures, many European banks look more vulnerable than
their American counterparts do—and that is saying quite something,
given the past week’s forced sale of Washington Mutual, America’s
biggest thrift, and Wachovia, its fourth-biggest commercial bank. In
America, outside Wall Street, the banks have lent 96 cents for each $1
of deposits. Continental European banks have lent roughly €1.40 for
each €1 of deposits. They have to borrow the rest from money-market
investors, who are not especially confident just now. Some Europeans,
including the British, Irish and Spanish banks, have housing busts of
their own. And they must contend with the toxic American securities
they bought by the billion, as well as their own slowing economies.

Western Europe is not the limit of this: the panic has also struck
banks in Hong Kong, Russia and now India. And it is not just the
geographical breadth of this crisis that is alarming, but also its
economic depth. Because it is rooted in the money markets (see article and article), it will feed through to businesses and households in every economy it hits.

The credit crunch: World on the edge
Oct 2nd 2008
From The Economist print edition