G7 nations fail to put their acts together

The Group of Seven finance (G7) rich countries have vowed to work together to end the global financial crisis, using all the tools at their disposal, but stopped short of any concrete action to bring back confidence among broke lending institutions and prevent further failures.

The G7, in fact, stopped short of backing a British plan to guarantee lending between banks, something the market sees as vital for ending the financial market turmoil and growing panic on financial markets.

Separately, the US had announced plans to buy equity stakes in financial institutions while the UK had unveiled plans to part nationalise its major banks and infuse fresh capital into broke banks. But these were confined to banks within their geographies and offered little help to unfreeze global credit markets.

Britain had committed 50 billion pounds to recapitalise its banks and offered to guarantee interbank lending by as much as 250 billion pounds to get credit flowing again. Chancellor of the Exchequer, Alistair Darling also called on other countries to follow the plan.
 
The G7 plan, however, was limited to ensuring that banks can raise money and offered no collective course of action to avert a deep global recession.

''The G7 agrees that the current situation calls for urgent and exceptional action,'' a statement released by the US Treasury said, adding, ''We commit to continue working together to stabilise financial markets and restore the flow of credit, to support global economic growth.''

The communique, released after a meeting of G7 finance ministers and central bankers in Washington, also said the G7 would ''take decisive action and use all available tools to support systematically important financial institutions and prevent their failure.''

''The G7 has finalised an aggressive action plan to address the turmoil in global financial markets and the stresses on our financial institutions,'' US treasury secretary Henry Paulson said in a separate statement. ''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,'' he added.

The G7 statement said the members will ''take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.''

The G7 members, however, acknowledged that a country-by-country, case-by-case approach to crisis management would be insufficient to stem the rot that has run for well over 14 months.

The G7 groups the United States, Canada, Britain, France, Italy, Germany and Japan.