>> welcome to "the journal." this is the news. the headlines at this hour. the big losses on international stock markets following the u.s. ratings downgrade. in london, more fluting, despite a massive police deployment. >> air traffic controllers set to walk off the job. >> international stock markets have seen steep falls today

following the downgrade of the u.s. credit rating at the end of last week. >> here in germany, the dax closed down more than 5%, falling below 6000 for the first time since september. >> there were big losses on wall street. the dow jones has also notched up losses of around 5%. the markets are taking a beating, but have so far avoided panic. the dow jones index opened down 1.6%, and kept falling as trading continued. that is wall street's response to standard and poor's downgrading of the u.s. credit rating from aaa to aa plus. some economists are very critical of that decision. >> the markets were already very nervous. this was just another slap in the face to the global recovery. it made markets more nervous and spreading a web of panic.

>> the other issue is eurozone debt. in a bid to calm markets, the ec be has begun buying bonds of heavily indebted eurozone countries. that caused yields on italian and spanish bonds to drop immediately. european stocks plunged on monday, with the dax closing down 5%. >> the falls had been expected after the u.s. credit rating downgrade at the end of last week. but there are other factors at play. our wall street correspondent has more. >> there was a lot of uncertainty going on. the s&p cut the aaa rating on one side, but most traders i talked to are not concerned about that. they're concerned about the fundamentals. the u.s. economy is not gaining any traction. debt problems in the euro and not solved at all. that is the basis for the fear and uncertainty in what is going

on. it is historic that s&p cut the aaa rating, but nobody is really blaming the messenger for saying what is going on with the u.s. economy. they are deeply concerned what is happening with the labor markets and an upscale production in the united states. if you look at the political side, nobody is expecting much from washington. people are tired of all the talks that are done in the white house. they do not expect big help from the government at this point. traders are hardly listening to what u.s. president barack obama is saying. >> picking up on that, president obama has spoken to reporters addressing the debt crisis. >> obama appealed for a bipartisan approach to solving the country's problems, which she admitted were serious. >> but here is the good news. our problems are solvable. we know what we have to do to solve them.

with respect to debt, our problem is not confidence in our credit. the markets continue to reaffirm our credit as among the world's safest. our challenge is the need to tackle our deficits over the long term. last week, we reached an agreement that would make historic cuts to defense and domestic spending. but there is not much further we can cut in either of those categories. what we need to do now is combined spending cuts with additional steps. we need tax reform that will ask those that can afford it to pay their fair share, and modest adjustments to help health care programs like medicare. making these reforms does not require any radical steps. what it requires is common sense and compromise. >> a message of calm from

president obama, but is it enough? i put that question to washington correspondent max hoffman. >> it is a message of what he wants to do. the markets are not buying it. nobody believes he can get it in the climate in washington. what markets are expecting is severe cuts in spending and programs that really hurt, for example social security, medicaid. and they expect more revenue, tax hikes. markets do not believe in this climate in washington, which is deeply divided, that it will be done. experts here do not expect that this message by president obama will make a huge difference on the market. >> standard and poor's has particular criticism for the political divide in the united states. is there any feeling that the

republicans and democrats can put aside these differences to come together and deal with this crisis? and >> so far, it is like each side is trying to take advantage of this downgrade. the democrats have called this downgrade the tea party downgrade. the republicans are blaming this on president obama. it does not seem like they are going to pull themselves together. they are on the same page when it comes to blaming s&p. this is a crucial time. it is the beginning of the election campaign for the presidential election next year for it -- next year. for republicans, this situation is not bad. since franklin roosevelt, no president has been reelected in an economic crisis like this one. >> european shares slumped to their lowest level in almost two years on monday. stocks in carmakers and miners

bore the brunt. but the news is not as bad as some thought it would be in germany. here is our correspondent in frankfurt. >> there has not been the crash some people feared at the beginning of the session. but it has been a major sell-off for german shares, the ninth day in a row in negative territory. that is down 5 percent, closing under 6000 points. mainly shares have been hit that are very dependent on exports and growth of the worldwide economy -- car shares and shares of steel makers. traders are very nervous at this moment. they fear the turmoil could continue. >> taking a closer look at the market numbers, pretty much the same story across europe. the dax tumbled and the euro

stocks 50 is down. the dow jones is down a big chunk, at 5.5%. the euro is down to $1.4787. one thing that has benefited from the decline is gold. it reached another record high monday, touching over $1,700 an ounce in hong kong trading. plunging shares in asia have sent dealers flocking to the precious metal as a safe haven. many investors are trading in their dollars and euro stocks for gold. more in a minute. >> in britain, rioting and looting have broken up for the third day running, despite police efforts to put an end to the unrest. violence has spread to eastern and southern london after affecting talk to him. -- tottenham.

vehicles were set on fire in south london. so were rubbish bins. police in birmingham said premises in the city center had been attacked, windows smashed and property stolen. let us go to our correspondent in london. she joins us on the line. this all started as an isolated protest against a police shooting, but the violence seems to be spreading out of control. >> that is right. the violence is escalating and spreading around london. we are seeing a huge blaze in croydon. violence has broken out in hackney and lewisham. the metropolitan police make a statement in the last couple of hours. they said they would go after the protagonists. they condemned this violence. they said cameras would capture

those carrying this out and promised to bring this to justice. the pictures we are seeing our cat and mouse games between writers and police officers, rubbish bins on fire. people are terrified. the police have urged londoners to get off the streets so they can deal with increasing levels of violence. >> it looks very serious. is this genuine frustration at the economic situation in britain, or is this young people taking advantage of the situation to cause damage and look things? >> this violence has been widely condemned by politicians and members of the public as incomprehensible. obviously, there was that vigil on saturday night which marked -- sparked the original right.

politicians have condemned this violence as unjustified. no real reason to spark further violence in terms of rioting. but there seems to be no end to it tonight. >> thank you for that update. united nations refugee agency has airlifted supplies to the somali capital for the first time in five years. the u.n. plane landed in mogadishu with 31 tons of relief supplies on board. more flights are planned. an islamist militia has controlled the airport and much of the city, and refused to let in foreign aid. on the weekend, it withdrew, leaving the government in control of the capital. the president of syria has sent tanks and troops into an eastern sunni city, undeterred by mounting criticism from other arab governments. kuwait, bahrain, and saudi

arabia have withdrawn embassies from syria. the king of saudi arabia called for an end to the bloodshed. residents say at least 65 people have been killed in just a day. tibetans in exile have a new prime minister. it is the first time someone other than the dali lama has been declared the political leader of tibet. he took his oath of office in india earlier today, with the dali lama on hand. 50,000 tibetans in exile elected him in april. tibet has been occupied by china since 1980, and beijing refuses to recognize the prime minister's authority. in ukraine, a judge has kept yulia tymoshenko jail. the trial is raising tensions in

the capital, kyiv. yulia tymoshenko was detained last friday for contempt of court after refusing to cooperate with the judge, denouncing him as a puppet of president viktor yanukovych. let us go back to ban for more business news. >> we are in the middle of the holiday season. not a good time to go on strike. air traffic controllers have pulled a 6 hour strike, starting first thing tuesday. 3000 flights could be directly affected. the airlines hope an injunction by the court would put a stop to the campaign. >> on tuesday morning, german airports are likely to come to a standstill, unless there is an injunction from the appeals court. travelers will have to be patient. on monday afternoon, a frankfurt court ruled the strike does not infringe on any labor laws. >> that says it all.

this is a great victory. the lot is on our side, at least the initial ruling. >> most passengers will not be favoring that victory. 400,000 travelers will be affected. foreign and international flights will be canceled. tour operators are feverishly making contingency plans. >> we are working to reschedule before the deadline. others will be delayed until after noon. >> german air traffic controllers immediately launched an appeal, in hopes of averting a potentially chaotic work stoppage. >> the appeal will be heard this evening or overnight. a labor court is also preparing for the appeal process. >> until that ruling, it is a game of wait and see for passengers and airlines. >> for any viewers with flight

plans to or by germany, they should contact their air flight operator. >> 15 years ago, -- 50 years ago, the berlin wall took shape in the capital. berlin is paying tribute to the 136 people who are known to have lost their lives trying to escape east germany. 50 of them were shot here in berlin. >> his brother died near here in december 1966. he was shot by an east german border guard on the bank of a canal as he was trying to escape over the berlin wall. he was just 17 years old. >> since then, christmas has never been christmas for us, because it happened around that time. christmas is a day of mourning for us.

>> the family only found out what happened when the car with his ashes arrived in the mail. east germany regarded border violators as criminals not worth remembering. scores of people were killed trying to get over the berlin wall. most were shot. now 29 steel plaques are going up in their memory. >> information points are being put up along the route of the wall to market certain spots. they enable people riding bikes to find out exactly what happened there. >> monday shot an official ceremony to dedicate a memorial to the prime minister almost half a century f for his death. >> would continue after a short break. we will be back with more analysis of this major sell-off

we of unseeing on international markets.

>> stock market's falling. world leaders in crisis talks. some analysts are worrying that the foundations of the financial system are shaking. >> the final straw seems to have been the decision by standard and poor's to downgrade its credit rating. >> investors are bracing for a long and bumpy ride. >> on the information boards in large letters -- aa plus rating. the downgrade has sent shockwaves through the financial world, as well as the rest of the population.

all the newspapers carry the same headlines. >> what i think the s&p thing did was to hit a nerve that there is something basically bad going on. it has hit the self-esteem of the united states, the psyche. >> after the u.s. downgrade, standard and poor's aaa rating is carried by only four economies, including germany. it indicates a country is extremely reliable and interest on bonds may be lower than 3%. the new status will almost certainly have repercussions for the u.s. belgium, for example, must pay 4% interest on its bonds. belgium has not been able to form a government since 2010. new zealand also has aa plus. many economists say that while the u.s. is no longer on top of

the class, it is stronger than other countries. china is rated slightly lower than the u.s., at aa minus. japan, the most indebted economy in the world, only has to pay 1% interest, because the country's citizens on such a high proportion of its debt. perhaps the u.s. will not do badly. economists suggest it might have to offer 3.5% interest in future instead of 3%. historically, that is still a lower rate. >> some analysts are calling it a perfect storm, with the u.s. debt crisis coming just as the eurozone struggles to get to grips with its problems. >> greece, ireland, and portugal have all received a big bailout packages. it seems larger countries like italy and spain may need help. the european central bank has started buying spanish and

italian bonds. the desired effect was quick to come as yields fell on markets. but analysts doubt the move will be affected in the long term. for more, we are joined by the head of the frankfurt school of finance and management. we have seen a lot of volatility on the markets. >> we have seen some action, but i think the unity as far as decision making and implementation of those decisions is lacking. markets are assuming a lack of unity, which is where we have rather low returns. this is a dangerous situation. standard and poor's is saying credit downgrades. there is some likelihood we will see that in the next month.

i think it is not the question of technicalities. it is more a question of decision making, and as far as the european union is concerned, a lack of leadership. there are hard decisions as far as the european financial stability fund is concerned. friday afternoon, we have had this letter of the commissioner. immediately, the market reacted very decisively. on top of this, we have the euro debt crisis. we have already seen a few big bailouts. what else can leaders realistically do? >> i think we are coming obviously to an end as far as government action against the market is concerned. historically, it is clear that whenever governments were fighting against the markets, in the and they always lose. as far as moving a downgrade, as

far as the debt crisis in europe is concerned, i think we might see the and as such. >> you have been talking about disunity. should germany be taking the lead in this case? >> germany has a crucial role to play. they seem to be the overall guarantor of greece, and now also france's concern. germany has a role, but they need more harmony. if there is a decision, there is a tendency to say whatever decision is passed to be implemented, because markets will interact and adapt accordingly. >> what is your prognosis for the weeks and months ahead? more market volatility? the collapse of the eurozone or the financial system itself? >> i think we will see more volatility, but i am optimistic that the eurozone as such will be safe. the alternative, especially for the germans, is not really

existent. germany has indirectly to pay a fee for the open markets they want to have, because they are getting the most out of it. i think germany has unfortunately to play a crucial role as far as the future of the eurozone is concerned. >> thank you very much for joining us. >> thank you. for many investors, the biggest fear in europe is that italy could be the next economy to collapse under its burden of debt. >> the government in rome has already taken drastic action to avert such a scenario, but will it be enough? here is more. >> this from an market and the world's financial markets have similarities. price and quality are important, but what is paramount is trust in the product. after all, who knows whether these peaches are sweet or riding inside and covered in pesticide? no one at this market can afford to have a bad reputation, least

of all the fishmonger. the repetition of italy's economy is assessed here at the stock exchange. the country's sovereign debt is at 120% of its gdp, ops signaling productivity and weak growth. the ec be is trying to bolster the economy by buying bonds. >> that are actively buying spanish and italian bonds. in this situation, it does not need to buy a large share of bonds to have an effect, given the fiscal fundamentals of italy are not so bad. >> especially given that italy has already taken big steps to get its budget deficit under control. the country's economics minister is confident. >> will put the balanced budget in the constitution, and we will work on an earlier bounced budget by 2013.

we will change the constitution to liberalize the economy. this is the mother of all liberalizations. >> italy once its 70 that -- 70 billion euro austerity package to be its beacon of hope. the italian public is seeing what lies ahead. pensions will sink and tax breaks will be slashed. >> will all have to pay for this. that is the way it is. i am also afraid. >> italy needs reforms which for many years have been promised, but never carried out. >> will the plan work? can italy's reputation be saved? like a good italian espresso, it only works when there is enough pressure. >> good espresso is what i need right now. >> that wraps up this special edition of the in depth, looking

at the growing economic crisis on both sides of the atlantic. >> stock markets in the u.s. and europe suffered big losses monday, and more turmoil is expected. >> will keep you informed. stay tuned. captioned by the national captioning institute --www.ncicap.org--