Countries will work to avoid broader economic fallout - US President

Other News Materials 11 October 2008 18:30 (UTC +04:00)

US President George W Bush said Saturday that the world's economic powers will work closely together to overcome the financial crisis and create a plan toward recovery, reported dpa.

"We will stand together in addressing this threat to our prosperity," Bush said. "We will do what it takes to resolve this crisis, and the world's economy will emerge stronger as a result."

Bush's comments came during a meeting in Washington of the Group of Seven (G7) finance ministers from the world seven wealthiest democracies to address the economic crisis that prompted worries of a global recession.

"All of us recognize that this is a serious global crisis, and therefore, requires a serious global response for the good of our people," Bush said. "We resolve to continue our strong efforts to return our economies to the path of stability and long-term growth."

The G7 continued its second day of meetings on Saturday to address the economic fallout caused by the crumbling financial markets that has tumbled stock exchanges worldwide. The economic powers were seeking combined steps to stave off further damage.

The meeting came as stocks around the world plunged at a record pace this week amid fears of a global recession.

Bush and the G7 officials announced no new specific policies, but the group suggested all seven governments were ready to throw public funds into banks that are threatened with collapse for a lack of capital.

Bush has already pushed through a 700-billion-dollar rescue package to bail out the financial sector, but the influx of money has yet to halt the slide on Wall Street or restore confidence in the credit market.

The G7 countries, which include Canada, France, Germany, Britain, Italy, Japan and the United States, promised on Friday 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."

On the sidelines of the meeting, some G7 members said they were planning to take equity stakes in their banks as part of a broader rescue plan and injection of capital.

US Treasury Secretary Henry Paulson said the US would buy shares in financial institutions in return for taking on their troubled mortgage assets, under authority already granted in Bush's rescue package approved by Congress last week.

German Finance Minister Peer Steinbrueck said a similar plan for Germany would be unveiled on Monday. Britain passed its own bail-out package earlier this week.

Steinbrueck said the G7 had adopted a "far-reaching" action plan that included a promise to protect all banks of "systemic relevance" to the global financial sector.

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.

But Paulson defended the lack of specifics coming out of the G7 meeting and said no one had any reason to expect a one-size-fits all solution.

"Some in the markets are naive if they think that different countries with different financial systems, economies in different stages of development, economies with totally different structures ... and different political systems, different laws are going to come up with precisely the same policy to deal with the issues," he said.

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, but did not specify a level. A number of countries have raised guarantees to ease people's fears over the safety of their bank savings. Some in Europe such as Ireland have extended full guarantees, prompting a few concerns over competition.

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."

The G7 meeting came at a time when there have been suggestions that the bloc is an outdated tool to manage a crisis that has spread well beyond the United States and Europe. A group of 24 countries also meeting Friday urged wealthier nations to include them in talks on resolving the financial turmoil.

Paulson will meet finance ministers from the Group of 20 - which brings together the top advanced and emerging economies - on Saturday, in a nod to the spreading nature of the crisis.

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 IMF and World Bank also hold their annual meetings this weekend.