G7 tackles ‘economic shock’

The world’s richest nations are fighting back against the global credit crisis…

The G7 group - Canada, France, Germany, Italy, Japan, the UK and USA - has approved a plan aimed at easing the continuing crisis in the global credit markets. The announcement was made after a meeting of the seven nations in Washington.

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.  It was drawn up for the G7 by the Financial Stability Forum (FSF) think-tank.

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.

Mild recession

Earlier this month, 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.

A statement issued by the G7 after the meeting, revealed: "We remain positive about the long-term resilience of our economies, but near-term global economic prospects have weakened. We have worked, and will continue to work, closely to address global challenges and take concrete action”.