, WASHINGTON, October 11 – The finance chiefs of the Group of Seven major advanced economies announced have a broad five-point action plan to tackle a global crisis that has markets and the banking system reeling.
The G7 pledged to use "all available tools" to support key institutions and prevent their failure in the worst financial crisis since the 1930s Great Depression.
"The G7 agrees today that the current situation calls for urgent and exceptional action," a joint statement released by the US Treasury.
"We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth."
The plan states that the G7 would "take decisive action and use all available tools to support systemically important financial institutions and prevent their failure."
Short on specifics, the communique was released after a meeting of finance ministers and central bankers of the United States, Germany, Japan, France, Britain, Italy and Canada in Washington.
US Treasury Secretary Henry Paulson said the G7 had "finalized an aggressive action plan to address the turmoil in global financial markets and the stresses on our financial institutions.
"This action plan provides a coherent framework that will direct our individual and collective policy steps to provide liquidity to markets, strengthen financial institutions, protect savers, and enforce investor protections," Paulson said in a separate statement.
There had been conflicting signals on how far officials would go towards establishing a common platform and the G7 statement on the meeting recommended no specific actions, sticking to broad objectives.
"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," Paulson said.
He said "it is critical for governments to continue to take individual and collective actions to provide much-needed liquidity, strengthen financial institutions, enhance market stability, and develop a comprehensive regulatory response.
"We must continue to closely coordinate our actions and work within a common framework so that the action of one country does not come at the expense of others or the stability of the system as a whole."
At a news conference, Paulson said the US was working closely with China and Japan, two of the biggest holders of Treasury bonds, amid the financial crisis.
"We are in close coordination and communication with Japan and China and other investors around the world," he said.
China holds some 1.8 trillion dollars in foreign reserves, the world’s largest, and Japan has nearly one trillion dollars in foreign reserves.
There has been speculation about what the two countries might do with their reserves, which are mostly held in dollar instruments, in light of the ongoing crisis.
Paulson also announced the US would start moving "as soon as we can" to inject capital into troubled banks as part of efforts to stem the global financial crisis, in cooperation with the G7.
Earlier this week, the White House said such a plan to directly recapitalized trouble banks was "actively" being considered as part of the 700-billion-dollar US rescue designed initially to buy troubled mortgage assets.
The G7 statement said the members will "take all necessary steps to unfreeze credit and money markets and ensure that banks and ensure that banks and other financial institutions have broad access to liquidity and funding."
"Fluff. Good fluff but fluff," said Robert Brusca, analyst at FAO Economics.
"A pledge of everything (makes it) sound like they are clueless," he added.
The G7 meeting heralded a weekend of International Monetary Fund and World Bank annual meetings that begin Saturday against a backdrop of growing panic in global markets.
As finance leaders and private financiers from the twin 185-nation institutions’ members descended on the US capital, they face a stunning loss of confidence in the financial system that has sent markets into a freefall.
US President George W. Bush is hosting a meeting of the G7 finance chiefs at the White House early Saturday.
The major industrial powers have already pumped massive amounts of liquidity into the global banking system in an effort to unclog credit markets, and led a coordinated cut in interest rates.