In a move that clearly demonstrated a collective desire to find an enduring solution to the current credit crunch, central banks across major global economies, two days ago, agreed to cut interest rates by up to half a point. Within seconds the US Federal Reserve and government banks in the European Union, Switzerland, Sweden, Canada and Britain had taken the decision that would largely provide a much needed thaw for the crisis and serve as, at least, a relief tonic for many homeowners struggling with mortgages and related bills.

The credit crunch, a major scourge to global financial markets, has been largely blamed on the near-collapse of the US economy. In the US itself, a number of the country’s major lenders have had to, in the last six months or so about, rely on a government life-line to survive. Only recently a huge bailout, perhaps the biggest since the Great Depression, was agreed for the Wall Street. Even with that, uncertainty still looms over America’s entire economy and by extension other economies.

The global phenomenon of economic crisis

It has become a natural fallout for all other economies to suffer the impacts of any major crisis in the US economy. With sub-prime mortgages taking a major blow as many borrowers failed to keep up repayments, lenders increasingly found it hard to finance fresh loans, for whatever purpose, and many had to raise their rates to scare away risky borrowers and guarantee their own survival. In the end, even the most prudent borrowers faced the backlash of the crisis as the mortgage market saw its sources of funds dry up. This set the stage for what looked, and still looks, like global economic depression.

Not long ago Prime Minister Gordon Brown, perhaps totally exasperated by the continued economic plunge in Britain, blamed it all on America. And he even posited it was America’s job to fix the global crisis. In the same manner German Finance Minister Peer Steinbrueck referred to the meltdown as “an American problem”, just as he posited that banks in his country wouldn’t need a bailout. But, as events have shown in the past couple of days, the onus is not entirely on the US to find a solution.

The trouble with global economies that are clearly interwoven is that none is acting entirely as an island onto itself. The truth is any striking change in one could hugely affect all others. This, probably, was what US Treasury Undersecretary David McCormick meant when he said that “strengthened international collaboration is needed now more than ever,” in tackling the crisis. There is no better example of this than the rates cut.

While it may take a little while for the full impacts of the cut to be felt by all and sundry, at least a few testimonies are already trickling in. In Northern Ireland, as reported in the media, the first beneficiaries were homeowners struggling with mortgage payment. A cut of 0.5 per cent in interest rates for this category of borrowers is a major relief. It was not just a local decision, but a coordinated global step to bring succour as the financial crisis is calmed.

A very important thing to note is the positive feeling among politicians, economic experts and even the general public that Mr Brown’s recent £50 billion bailout would translate into the long awaited answer everyone had sought.

One more thing that needs to be done to rescue the mortgage market in the UK is for banks to allow the impacts of both the cut in interest rates and government bailout to permeate all nooks and crannies. Northern Ireland’s Northern and Ulster banks have already moved in this direction. Others need to emulate them as soon as possible.