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G7 nations pledge action to ensure stability

(Agencies)
Updated: 2008-09-23 07:02

Washington/Paris - Group of Seven nations welcomed the $700 billion US markets bailout plan on Monday and said they were prepared to step up international cooperation to protect the world's financial and banking system.

G7 central bank governors and finance ministers including US Federal Reserve Chairman Ben Bernanke (R) leave after posing for a group photo outside the US Treasury in Washington, DC, April 2008.  [Agencies]

But a day after US Treasury Secretary Henry Paulson said he was "aggressively" encouraging other countries to put in place bailout packages of their own, there was little sign other G7 governments were prepared to follow Washington's lead.

"We pledge to enhance international cooperation to address the ongoing challenges in the global economy and world markets and maintain heightened close cooperation between finance ministries, central banks and regulators," the G7 ministers said in a statement following a conference call on Monday lasting 15-20 minutes.

"We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system," they said.

The statement, a few weeks before G7 finance ministers and central bank governors meet in Washington on October 10, follows a tumultuous week that started with the demise of Lehman Brothers and ended with one of the biggest financial rescues in history.

The conference call at 1130 GMT, which was convened on Sunday, followed intense telephoning between senior officials over recent days and a preparatory call by deputies to the ministers and central bank governors, a G7 source said.

The statement said ministers welcomed the "extraordinary actions" taken by Washington to remove illiquid assets that have contaminated banks' balance sheets and fuelled a financial crisis widely seen as the worst since the 1930s.

Little Appetite

The world's big central banks have already joined in a coordinated move with the US Federal Reserve to pump hundreds of billions of dollars in extra funding into markets to prevent the world financial system from seizing up in a credit freeze.

But there was little appetite to mimic Paulson's scheme to buy up toxic mortgage-related debt from financial firms.

"At the moment, I don't think Japan needs to launch a programme similar to that of the United States," Japanese Vice Finance Minister Kazuyuki Sugimoto told reporters in Tokyo, echoing similar comments from France, Britain and Germany.

The European Union also made it clear that it would not be joining a rescue package. EU Monetary Affairs Commissioner Joaquin Almunia told a conference in Slovakia that individual national governments would have to decide on their own.

"It's up to them to consider whether they can follow this initiative," he said.

French President Nicolas Sarkozy, whose country holds the rotating EU presidency, is visiting the United States this week for a United Nations meeting and is expected to talk to US officials about the crisis.

But governments outside the United States have generally been careful to draw a distinction between Wall Street and their own financial institutions.

Canadian Prime Minister Stephen Harper said Canada's financial system had stronger accountability than that of the United States, while France's Economy Minister Christine Lagarde said French banks were better balanced than their US counterparts.

"Everything is affected like all banks in the world but there are no worries over the solidity of these French banks," she told RMC radio on Monday.