Becky Barrow and Benedict Brogan
UK Daily Mail
Saturday, Oct 11, 2008
The world’s richest countries have agreed a plan to try and stem the financial crisis that saw a catastrophic £250billion wiped off the stock market in the worst week ever for the FTSE 100.
After ‘blind panic’ set in on the markets on Freefall Friday, finance ministers from the G7 pledged to take ‘decisive action and use all available tools’ to support financial institutions.
They approved a five point ‘plan of action’ at crisis talks in Washington which opens up the possibility large sections of the global banking system will be part-nationalised.
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Although the details are vague, the plan promises to ‘ensure that our banks…can raise capital from public and well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses’.
This could allow France, Germany, Italy, Japan and Canada to follow the U.S. and Britain in buying up equity shares in struggling banks with taxpayers’ money.
Britain announced earlier this week that it would use up to £50billion to recapitalise ailing financial institutions. The U.S. announced it would do the same as part of its $700billion bail-out yesterday.
Political leaders will have to hope this latest co-ordinated action is enough to calm the storm after an emergency rates cut on Wednesday and bail-outs on both sides of the Atlantic totally failed to ease investor panic.
The continuing carnage meant London’s bluechip index lost a staggering quarter of a trillion pounds – 21 per cent of its value – in just five days, with similar catastophic falls around the world.
On Monday the FTSE had opened at 4980 points. Last night, it closed at 3932, a fall of 1048.
In Wall Street, the Dow Jones Index has crashed by nearly a fifth since Monday and yesterday President Bush was forced into making his 19th emergency statement since September.
There was another blow for British investors last night when Iceland’s Prime Minister said point-blank that his country could not afford to repay overseas investors in its collapsed banks.
This article was posted: Saturday, October 11, 2008 at 4:20 am