Finance Minister Paula Cox fears the turmoil in the world’s financial markets will have “potential employment repercussions’’ in Bermuda.

In a statement this afternoon, she also said that due to the current crisis, prospects for economic growth in Bermuda next year may be lowered and she fears some private sector projects in Bermuda could be affected.

In two major developments this week, the world’s fourth largest investment bank Lehman Brothers filed for bankruptcy and the US Federal Reserve bought American International Group, which employs about 200 people in Bermuda.

The statement said: “While it is far too early to determine with any certainty what precise impact the current financial events unfolding in the US will have on Bermuda, there are clear signals that the changes will have some potential employment repercussions in Bermuda and perhaps implications for financing of some private sector projects.

“I have indicated already that the growth prospects for our economy through the balance of 2008 are lower as a result of the continuing fall-out of the sub-prime debacle. In the face of the most recent events involving Lehman Brothers and American International Group (AIG), that outlook may very well characterise 2009 as well.

“In relation to the most recent events, my technical officers in the Ministry of Finance have been in touch with all relevant authorities, including the Bermuda Monetary Authority (BMA) and the Ministry of Tourism and Transport.

“Lehman Brothers had important financial relationships with private sector entities in Bermuda.

“Likewise, AIG has an important footprint in Bermuda as it does in some 130 other countries around the world. That is why it is not surprising that the US Government has intervened in the manner that it has. Global financial stability is clearly at stake.

“The Ministry of Finance will continue to update the public on the basis of confirmed information in the wake of any further significant developments.”

Late last night, the US government took control of AIG in an $85 billion bailout to prevent the bankruptcy of the nation's biggest insurer and the worst financial collapse in history.

The Federal Reserve will provide a two-year loan, take 79.9 percent of the New York-based company’s stock and replace its management because “a disorderly failure of AIG could add to already significant levels of financial market fragility’, according to a statement by the central bank late yesterday.

* Full story and more reaction in tomorrow's Royal Gazette.