G7 nations pledge to fight crisis
G7 nations pledge to fight crisis
G7 finance ministers outside the US Treasury in Washington, 10 October 2008
The G7 nations have pledged a co-ordinated response to the crisis
Finance ministers from leading industrialised nations have pledged action to tackle the financial crisis after a torrid week on stock markets.
The G7 nations said they would take “decisive action and use all available tools”, after a meeting in Washington.
They issued a five-point plan aimed at unfreezing the flow of credit.
Widespread fears of a global recession caused Asian, European and US markets to tumble on Friday despite rate cuts and cash injections by central banks.
As well as the Washington meeting of the G7 – which comprises the US, Japan, Britain, Germany, France, Italy and Canada – the International Monetary Fund (IMF) will hold talks in the US capital over the weekend.
Leaders of the eurozone countries are also scheduled to meet in Paris on Sunday.
After Friday’s G7 meeting, US Treasury Secretary Henry Paulson said the group had a clear vision of what needed doing, and was working together to stabilise the world’s panic-stricken money markets.
Henry Paulson says “it is critical for governments to provide much needed liquidity”
“We are squarely focused on the immediate need to stabilise our financial market and recognise that investor confidence is critical to restore liquidity and enhance the stability of our financial system,” he said.
The plan is intended to protect major banks and financial institutions from failure and ensure they can raise capital from public and private sources.
It includes steps to unfreeze the flow of credit and protect savers, although it did not reveal any specific measures.
Mr Paulson said the US was working closely with China and Japan – both of which hold large amounts of US treasury bonds – to resolve the crisis.
He added that the US government was also working on a scheme to buy stakes in struggling financial institutions.
“We are working to develop a standardized programme that is open to a broad array of financial institutions,” he said.
While the G7 statement identifies the main areas requiring urgent attention, it is short on detail, says the BBC’s Andrew Walker in Washington, adding that much will now depend on how each government takes its own plans forward.
Earlier on Friday, US President George W Bush said his government would continue to act to resolve the crisis.
Speaking on the White House lawn, Mr Bush said the recent market turmoil was being driven by “uncertainty and fear”.
But he said the US authorities had a comprehensive strategy and a wide range of tools that they were using “aggressively” to fix the problems.
President Bush leaves after speaking at the White House on 10 October 2008
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Mr Bush defended last week’s rescue package, saying it was big enough, but stressing it would take time to have its full impact.
But volatile market conditions continued despite moves on Wednesday by six of the main central banks to cut interest rates by 0.5% and a separate move by China’s central bank to cut rates by 0.27%.
Wall Street has lost a fifth of its value in the past 10 trading days, suffering one of its biggest weekly falls since the Dow Jones index was created 112 years ago.
Markets in France, Germany and Britain plunged to end Friday between seven and nine percent lower.
Shares in Asia also closed down sharply, with Japan’s main Nikkei index suffering its biggest one-day drop since the 1987 stock market crash.
As panic mounted, there were trading suspensions in several countries including Russia, Austria, Iceland, Romania, Ukraine, Brazil and Indonesia.
Amid the gloom, the British pound tumbled to a five-year low against the US dollar and oil prices plummeted to a one-year low.
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