They are expected to approve some form of new currency controls this week, in a last-ditch attempt to seize the initiative from the "masters of the universe" - the men who control the financial markets.
The fear is that without moves to restore confidence, the markets could crash within days, pushing the world economy into a 1930s-style slump.
The most urgent priority is to prevent billions of dollars flooding out of Brazil, threatening to infect Latin America with the debt crises which have brought the Asian and Russian economies to their knees. This could be done by imposing emergency restrictions on the transfer of dollars out of the country. If Brazil defaults on its debts, Mexico and Argentina could follow.
"The City - and bankers round the world - are petrified the G7 is going to reintroduce some form of capital controls," said a senior London banker.
Brazil's bail-out is part of a comprehensive plan knocked together by policymakers meeting in emergency sessions this weekend, on the eve of the annual meetings of the International Monetary Fund (IMF) and World Bank.
Mohamed El-Erian, a senior executive at Salomon Brothers, Smith Barney and the former assistant to a senior IMF official, confirmed that the IMF was discussing some form of capital controls as part of a Brazilian bail-out.
Britain, which is feeling the effect of the strong pound with increasing numbers of exporters shedding jobs, will gain some comfort from the Washington meetings. Expectations that the Bank of England's Monetary Policy Committee will cut UK interest rates on Thursday mounted as the Chancellor suggested in Washington, where he was attending yesterday's meeting of the G7 finance ministers, that the time had come to turn "talk into action".
But in a sign of a policy clash, the continental European nations drew back from any commitment to lower rates. "The challenges that face each of our economies differ," the G7 communique noted - a sign of strong disagreements.
Tomorrow the G7 finance ministers, with President Clinton sitting in, will meet their counterparts from 15 large emerging market nations to talk about reforming the system through which Western capital flows in and out of developing economies. On Tuesday President Clinton addresses the IMF annual meeting and by then, if the G7 plan works, share prices will stabilise.
Speaking last night in Washington, Mr Brown stressed the importance of helping countries worst hit by the financial crisis. He proposed the establishment of a new global watchdog to supervise world markets.
City bankers expressed interest in the Chancellor's speech, but their chief concern is whether or not capital controls are to be introduced.
Meanwhile, the French and Germans are calling for a watered down version of the euro for the world as a whole in which currencies would be loosely pegged to one another. The US, which has sponsored the rise of laissez- faire global markets, is calling for increased "transparency" which would allow policymakers to get a better grip on the true financial condition of both Third World capitals and high-risk hedge funds.
A concerted move to reregulate international capital flows is not assured. But in a speech in Ottawa last week the Chancellor made clear he was opposed to "permanent" capital controls, indirectly highlighting the possibility that he might not stand against temporary capital controls.
Last Tuesday, the Federal Reserve Bank chairman Alan Greenspan cut US interest rates by a quarter of a per cent. But the markets ignored the good news and the FT-SE 100 Index slumped 5 per cent on Thursday and Friday to close near its year low.
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