Washington - The world's seven leading economies agreed to
do everything in their power to tackle a financial crisis that
threatens to plunge the world into recession and promised to provide
banks the money they need to stay afloat, according to a joint
statement by the Group of Seven on Friday.
The G7 finance ministers and central bank heads said they would
use 'all available tools' to stabilize the financial system and
unblock credit markets that have come to a virtual halt in the United
States and Europe.
'The G7 agrees today that the current situation calls for urgent
and exceptional action,' read the statement. 'We commit to working
together to stabilize financial markets and restore the flow of
credit.'
The meeting in Washington came as stocks around the world plunged
in record levels this week amid widespread fears of a global
recession.
There were no specific joint moves announced, but the group did
suggest all seven governments were ready to throw public funds into
banks that are threatened with collapse for a lack of capital.
The seven countries promised to 'ensure that our banks ... can
raise capital from public as well as private sources in sufficient
amounts to re-establish confidence and permit them to continue
lending to households and businesses.'
A number of countries said they were planning to take equity
stakes in their banks as part of a rescue plan and injection of
capital.
Treasury Secretary Henry Paulson said the US would buy shares in
financial institutions as part of the 700-billion-dollar rescue
package approved by Congress last week.
He said the government was working to use its powers to buy up
troubled mortgage assets at the heart of the crisis 'as soon as
possible.'
German Finance Minister Peer Steibrueck said he was open to a
similar plan for Germany. Britain passed its own bail-out package
earlier this week.
But the G7 statement was a sign of the group's reluctance to offer
a common, cross-border solution to shore up banks on the brink of
bankruptcy in their own countries.
Italian Finance Minister Giulio Tremonti complained the statement
was 'too weak' shortly before it was adopted, according to Bloomberg
News.
Paulson denied that a common solution was the right way forward,
arguing 'different countries have different financial systems.'
He called the statement an 'aggressive action plan to address the
turmoil in global financial markets and the stresses on our financial
institutions.'
The G7 bloc also promised 'robust' guarantees for the savings
deposits of consumers. Countries have raised guarantees for savings
accounts to a variety of levels to date. Some in Europe such as
Ireland have extended full guarantees.
IMF Managing Director Dominique Strauss-Kahn warned Friday that
the only way to restore market confidence was through 'government
intervention which is clear, comprehensive and cooperative among
countries.'
Strauss-Kahn on Thursday said the world was on the 'cusp' of a
recession after the IMF forecast global growth of 3 per cent next
year. Growth below 3 per cent is considered a global recession by the
IMF.
The G7 was one of a series of meetings this week in Washington
between the world's finance ministers. Paulson will be hosting a
gathering of the world's 20 leading economies on Saturday on the
sidelines of the annual International Monetary Fund and World Bank
meetings this weekend.
USA
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