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World finance chiefs grasp for solutions

In the face of a growing financial firestorm, finance chiefs from the Group of Seven nations were due to meet in Washington today in search of a solution.

business Updated: Oct 10, 2008 15:59 IST

In the face of a growing financial firestorm, finance chiefs from the Group of Seven nations were due to meet in Washington today in search of a solution.

Financial authorities in the major powers have already pumped massive amounts of liquidity into the global banking system in an effort to unclog credit markets and joined in a coordinated cut in interest rates.

But panic was still gripping markets, which have hit multi year lows in the United States and most other countries amid loss of confidence.

The G7 meeting will bring together finance ministers and central bankers of the United States, Germany, Japan, France, Britain, Italy and Canada.

US President George W Bush agreed to host finance ministers from the G7 tomorrow. Bush vowed to take "strong action" against the crisis and emphasized "our common desire to work with our European friends to develop a best-as-possible common policy."

Marc Chandler, analyst at Brown Brothers Harriman, said despite the grim outlook, the G7 still has some options to help calm the storm.

"We are hesitant to spread rumors, but there is increasing speculation that the G7 meeting could take another major step and that is to guarantee all interbank lending," he said.

"This talk is having a demonstrable impact on the interest rate markets. It is difficult to evaluate the likelihood, but it is important to note that officials generally recognize that current measures are not yet sufficient to turn the corner of the crisis," he said.