G7 financial leaders to discuss crisis

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The Independent Online

Financial officials from the Group of Seven industrialised nations will discuss how to coordinate action between their countries' central banks, a source said today.

The move follows several days of market panic and a downgrade of the US credit rating.

The person spoke on condition of anonymity because the level and timing of the contacts had yet to be confirmed.

French Finance Minister Francois Baroin, whose country currently holds the G7 presidency, said he had been in close contact with his G7 counterparts "throughout the previous days and also this very morning".

"We'll be carefully watching the evolution of what might happen on Monday," Mr Baroin told France's RTL radio, without providing details on the contacts. The G7 members are Britain, Canada, France, Germany, Italy, Japan and the US.

Standard & Poor's downgrade of the US credit rating yesterday added to growing fears over debt levels and economic growth in the world's biggest economy and in large European nations, like Italy and Spain.

The European Central Bank has so far been reluctant to intervene in the large Italian and Spanish debt markets in an attempt to stabilise plummeting bond prices, as it has previously done for Greece, Ireland and Portugal, the three eurozone countries that have already been bailed out.

But Luc Coene, the head of Belgian's central bank and a member of the ECB's decision-making board, said yesterday that the ECB may be prepared to help Italy and Spain once the two countries have taken more concrete steps to get their public finances under control.

Many investors have also been calling on the US Federal Reserve to start pumping money into the US economy again, as it has done through two large-scale bond buying programmes since the 2007 financial crisis, to help underpin the nation's slowing economic recovery.

Italian Premier Silvio Berlusconi and EU Monetary Affairs Commissioner Olli Rehn yesterday called for coordination between G7 countries.

The downgrade of the US credit rating is also bad for Europe, whose economy is closely linked to the US and whose weak members depend on a healthy global economy.