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G7 leaders unveil economic rescue plan

11/10/2008

Finance ministers from the G7 group of leading industrialised nations have agreed an "aggressive action plan" to tackle the global financial crisis.

Henry Paulson, the US Treasury Secretary, said a five-point plan has been agreed upon to stabilise worldwide and protect banks and financial institutions from failing.

"Never has it been more essential to find collective solutions to ensure stable and efficient financial markets and restore the health of the world economy," he said.

"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."

The US has announced its intention to invest directly in its banks, following the UK government's injection of capital into its own institutions.

Mr Paulson's confirmation marks the first direct government intervention in banking by the US government since the Great Depression.

The International Monetary Fund (IMF) will hold talks in Washington DC this weekend while leaders of the eurozone are to meet in Paris on Sunday.

Speaking at the White House ahead of the G7 meeting, US president George Bush said his administration would continue to act to add stability to markets.

"The world is sending an unmistakable signal: We're in this together, and we'll come through this together," he said.

"The plan we are executing is aggressive. It is the right plan. It will take time to have its full impact. It is flexible enough to adapt as the situation changes. And it is big enough to work."

The Dow Jones slumped down eight per cent moments after opening on Friday, mirroring slumps on the FTSE 100 in London and European and Asian markets.

The panic-selling came despite two rescue packages worth $700 billion (£411.8 billion)in the US and £500 billion in the UK, while central banks around the world announced a coordinated 0.5 percentage point interest rate cut on Wednesday.