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Darling calls for economic action G7 passes plan to ease credit woe
(about 4 hours later)
Chancellor Alistair Darling has described the credit squeeze as the "biggest economic shock" the world has seen since the 1930s Great Depression. The G7 group of most industrialised nations has approved a plan aimed at easing the continuing crisis in the global credit markets.
Speaking in Washington DC before the start of a meeting of the G7 group of most industrialised nations, he said the seven had to take "urgent action". Including calls for more oversight of financial firms and greater financial transparency, G7 members have committed themselves to its implementation.
Yet Mr Darling also cautioned that such action meant better regulation rather than the temptation to simply add more. The plan also aims to improve the work of credit rating agencies.
G7 ministers have gathered before World Bank and IMF meetings at the weekend. The announcement was made after a meeting of the seven nations, including the US, UK and Germany, in Washington.
The G7 finance ministers are tipped to debate proposals including better oversight of banks and how to maintain access to capital. "We remain positive about the long-term resilience of our economies, but near-term global economic prospects have weakened," said a statement issued by the G7 after the meeting.
They are also expected to address the wide variation in currency exchanges, particularly the weak US dollar. The plan further calls for the strengthening of authorities' responsiveness to financial risks, and puts in place arrangements to deal with stress in the financial system.
Slowdown It was drawn up for the G7 by the Financial Stability Forum (FSF) think-tank.
The Financial Stability Forum (FSF) think-tank is set to make a list of recommendations that G7 leaders will discuss.
The IMF must focus its surveillance more closely on financial sector issues and on the links between developments in the financial sector and the real economy Alistair Darling
The FSF is comprised of a number of central bank and treasury officials from around the world.The FSF is comprised of a number of central bank and treasury officials from around the world.
Mr Darling said he would be calling for more measures to tackle any future global economic crisis. "We have worked, and will continue to work, closely to address global challenges and take concrete actions," said US Treasury Secretary Henry Paulson.
"That is why the IMF needs to work with the FSF to develop an early warning system," he said. 'Urgent action'
"As part of this I believe that the IMF must focus its surveillance more closely on financial sector issues and on the links between developments in the financial sector and the real economy." Before the G7 meeting, UK Chancellor Alistair Darling described the credit squeeze as the "biggest economic shock" the world has seen since the 1930s Great Depression.
'Rapid implementation' He said the G7 had to take "urgent action".
US Treasury Under-Secretary David McCormick said he was looking forward to "discussing and implementing rapid and effective implementation of the FSF findings with our colleagues". The other G7 members are France, Italy, Japan and Canada.
Among the expected proposals are increased transparency about the risks banks undertake, stricter rules about credit ratings, and the role of central banks in pumping money into the finance system. The G7 finance ministers had gathered before World Bank and IMF meetings on Saturday and Sunday.
The credit crisis, that stemmed from a slowdown in the US housing market, has had a knock-on effect worldwide and dented growth. The credit crisis stemmed from a slowdown in the US housing market and has had a knock-on effect worldwide and dented growth.
Earlier this week the International Monetary Fund (IMF) forecast that the US would enter a "mild recession" in 2008 and said that the credit crunch could cost banks and other financial institutions around $1 trillion.Earlier this week the International Monetary Fund (IMF) forecast that the US would enter a "mild recession" in 2008 and said that the credit crunch could cost banks and other financial institutions around $1 trillion.
The weakening US economy has been a major factor in pushing down the value of the dollar, which slipped to a 15-year low against the pound earlier in the week. Meanwhile the pound has fallen sharply against the euro. The weakening US economy has been a major factor in pushing down the value of the dollar, which slipped to a 15-year low against the pound earlier in the week.
The G7 members are the US, Britain, France, Germany, Italy, Canada and Japan. Meanwhile the pound has fallen sharply against the euro.