Richest nations in crisis summit

7:54am Saturday 11th October 2008

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THE world’s richest nations will meet in emergency session today in a bid to find a solution to the worst financial crisis in generations.

Finance ministers from the seven biggest economies – the G7 – will meet central bankers and representatives of the International Monetary Fund (IMF) in Washington.

It was also announced last night that Eurozone countries will hold an urgent summit tomorrow.

Top of the agenda at both meetings will be a way to get ahead of the punishing stock market falls that have wiped billions off shares and pension funds, and brought some of the biggest banks in the world to their knees.

Last night, Chancellor Alistair Darling warned that it was “essential” the world’s leading economies took further action to stabilise the situation.

He was speaking after another terrible day on stock markets around the world as share prices fell amid fears of a major recession.

London’s FTSE 100 Index endured its worst week since the Black Monday crash of 1987.

The index tumbled 8.9 per cent – surpassing even Monday’s record sell-off – capping a week that has wiped more than £250bn off the value of top-flight stocks.

The index eventually closed below the 4,000 mark at 3932.1 – its lowest level for more than five years.

A speech by US President George Bush only made things worse, because the administration had nothing new to offer.

Shares on the Dow Jones shares index in New York fell as Mr Bush pledged to find a way forward.

Mr Darling said it was not enough to “just talk about these things’’.

He urged the other wealthy nations to follow Britain’s lead with its bank recapitalisation plan.

“This is a genuinely global problem and we, all of us, all over the world, need to step up to the mark and do something about it,’’ he said.

“I believe that governments can make a difference – they will make a difference provided that we agree to act together.

“We are going through a very, very turbulent time, a very difficult time, and it’s essential, especially at this time when you have got a problem like this, that governments across the world, particularly the largest economies meeting here this weekend are prepared to do whatever it takes.

“There is a range of things that need to be done. The critical thing is that we don’t just talk about these things, we actually get on with it.”

His comments were echoed by Prime Minister Gordon Brown, who said he was trying persuade other countries to fall in behind Britain.

The Prime Minister spoke as efforts continued to rescue billions of pounds frozen in collapsed Icelandic banks.

A team of UK Treasury officials arrived in Iceland for urgent talks after the collapse of the country’s banking sector left councils and charities in the UK facing losses of up to £1bn.

The crisis sparked a furious row between London and Reykjavik, with Gordon Brown denouncing the “totally unacceptable” failure of the Icelandic authorities to guarantee UK deposits.

Iceland’s Prime Minister, Geir Haarde, hit back blaming Britain for the collapse of his country’s third largest bank, Kaupthing, after the British Government used anti-terrorist legislation to freeze its assets in the UK.

More than 100 councils – including Redcar and Derwentside in the North-East – as well as police forces, fire services and transport authorities have savings in the crisis- hit institutions.

Although the Government has pledged private savers will get their money back, there has been no hint of a bail out for councils and charities.

Minister for the North-East and Government Chief Whip Nick Brown said the Government should not bail out local authorities that have lost money through their investments.

He said: “Local authorities are independent institutions that are professionally advised on their investments and the Government does not offer a guarantee to a public authority. It would be asking too much of central government.”

Asked if he believed some of the local authorities had been unwise in how they invested money, Mr Brown said: “If they have lost the money it follows it wasn’t necessarily the wisest thing to invest in.

“There are things the Government can do and will look at in specific cases, but it falls short of underwriting losses.”

Such measures might include allowing some councils to defer payments of funds to central Government to help them with their cash flow.

But the losses faced by local authorities will be small compared to the global picture.

All eyes will be on Washington this weekend in the hope a global solution can be found.

Many analysts believe a worldwide rescue similar to Britain’s bank recapitalisation scheme announced earlier this week is the only thing that will stop the financial firestorm.