G7 agrees crisis requires ‘global’ action — Bush

10/12/2008

WASHINGTON — US President George W. Bush said yesterday after crisis talks with finance ministers from the G7 rich countries that all agreed the world financial meltdown required “a serious global response.”

“All of us recognize that this is a serious global crisis and therefore requires a serious global response for the good of our people,” Bush said in the White House Rose Garden after the roughly 40-minute meeting.

“The United States has a special role to play in leading the response to this crisis. That’s why I convened this morning’s meeting here at the White House and it is why our government will continue using all the tools at our disposal to resolve this crisis,” he stressed.

Bush was joined by Finance ministers from Britain, Canada, France, Germany, Italy, Japan, as well as International Monetary Fund (IMF) chief Dominique Strauss-Kahn and World Bank President Robert Zoellick and other officials.

With some warning that the crisis may be the worst since the Great Depression of the 1930s, Bush vowed no repeat of steps that deepened that crisis, such as enacting protectionist steps that choke off trade.

“There have been moments of crisis in the past when powerful nations turned their energies against each other, or sought to wall themselves off from the world,” the US President said.

“This time is different: The leaders gathered in Washington this weekend are all working toward the same goals,” he added. “We’re in this together, we’ll come through it together.”

Bush hailed international cooperation thus far, and said the Group of Seven (G7) would work with an enlarged forum known as the Group of 20 that includes other major economies like China, India and Russia.

“As our nations confront challenges unique to our individual financial systems, we must continue to work collaboratively, and ensure that our actions are coordinated,” he said.

“We must ensure the actions of one country do not contradict or undermine the actions of another. In an interconnected world, no nation will gain by driving down the fortunes of another,” Bush warned.

The early morning meeting at the White House comes after the G7 Finance chiefs agreed last Friday to use “all available tools” to support major banks and prevent their failure as they sought to dampen a financial firestorm threatening more mayhem.

The plan followed another day of massive falls on the markets as investors rushed to the exits, putting G7 officials under intense pressure to come up with a convincing accord.

Analysts said, however, there was a lack of substance and nothing that would calm the markets and so allow a more measured approach to the problems thrown up rather than the crisis mode of the past few weeks.

“The G7 agrees today that the current situation calls for urgent and exceptional action,” a statement released by the US Treasury said.

“We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth.”

The G7 major advanced economies agreed to “take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.”

The G7 said it would 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.”

The credit markets are crucial because they are used to provide the short-term funding essential for banks and companies to manage their affairs.

Since the collapse of the US subprime or higher-risk home loan market last year, the banks have been saddled with mountains of bad debt, undercutting their finances and making them unwilling to provide any but the safest loan.

As lending has dried up, business has been increasingly affected, in turn hitting employment and consumer spending to leave the US economy prey to a vicious circle of declining demand and activity.

In this respect, the G7 said it would “ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.”

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,” said Paulson, the architect of a $700-billion bank bailout passed by Congress last week.

The G7 agreement came after global stock markets went into a freefall Friday as panicked investors found no place to hide, even though Wall Street managed to stem the losses in a session of ups and downs.

Some markets plunged 10 percent in the worst performance since the 1987 stock crash as part of a global meltdown that began with Tokyo’s 9.6 percent nosedive. AFP

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