G7 nations reveal five-point plan
G7 ministers, which comprise the US, Japan, Britain, Germany, France, Italy and Canada have met in Washington, and issued a five-point plan to unfreeze credit markets.
The nations have pledged to take ‘decisive action and use all available tools‘ to support financial organisations.
The plan is intended to protect major banks and other financial institutions from collapse and ensure they can raise capital from public and private sources. However, specific details have yet to be revealed.
Last week, the British Government announced plans to stem the collapse of UK High Street banks by setting aside £50 billion and investing in them. The US announced it will also invest in US banks by using the $700 billion (£380 billion) bailout fund set aside by Congress.
US treasury secretary, Henry Paulson, said it is critical for Governments to provide much needed liquidity to strengthen the stability of the financial system.
Meanwhile, on Friday, US President George W. Bush said the US Government would continue to act to resolve the crisis.
Shares have plummeted worldwide amid fears of a global recession. In the last 10 trading days, Wall Street lost 20% of its value and suffered its largest weekly fall since the Dow Jones index was created in 1896.
The FTSE 100 crashed below the 4,000 mark on Friday and suffered its worst week since the 1987 crash.
The turmoil throughout the world’s financial markets resulted in six central banks cutting interest rates by 0.5% last Wednesday – a day earlier than scheduled.
In the meantime, the International Monetary Fund (IMF) warned global equities could plummet by a further 20% this week unless decisive action is delivered by Governments to tackle the crisis.
IMF managing director, Dominique Strauss-Kahn, warned that the world financial system was standing on the ‘brink of systemic meltdown‘.
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