labels: World economy
G7 pledges support sans cash to Paulson plan news
23 September 2008

G7 nations propose to do ''whatever needed'' to stabilise global financial system, except follow the US in initiating more rescue plans.

Though US Treasury secretary Henry Paulson has tried to 'aggressively encourage' other countries to follow the US' lead in rolling out a bailout package to rescue its financial industry from the ongoing crisis, the G7 nations, while welcoming the US' step, are reluctant of embarking on similar plans.

The G7 group of finance ministers and central bank governors have welcomed the $700 billion bailout plan put together by the US government for the beleaguered financial industry, but have not provided any sign that they are inclined to follow suit in coming up with similar rescue packages.

Leaving their options open, the G7 said it would take "whatever actions may be necessary" to ensure the stability of the global financial system, while saying that it ''strongly supported'' US Treasury plan to purchase $700 billion worth toxic mortgage debt and other securities.

Yesterday, US Treasury Secretary Henry Paulson has proposed an extended financial rescue plan for all banks with large scale operations in the US even as he urged the US Congress to swiftly adopt a $700-billion financial rescue plan for failed US financial institutions.

''We need this to be clean and quick and we need to get it in place," Paulson had said in an ABC television interview.

Before the weekend, the Bush administration had urged Congress to grant the treasury far-reaching emergency powers to buy hundreds of billions of dollars of distressed mortgage securities from the $3.4-trillion money market by creating a $700 billion government-backed investment vehicle. 

G7 not following the US
Echoing comments from fellow G7 members Britan, Germany, France and the European Union (EU), Japanese vice finance minister Kazuyuki Sugimoto said that Japan did not need to launch a similar program ''at the moment''.

Speaking to reporters in Berlin after a conference call, German finance minister Peer Steinbrueck said that none of the other six members of the G7 group would follow the US in adopting a rescue plan.

The other six G7 nations argue that their banks are in much better shape than banks in the US, and therefore, similar rescue measures are not needed. The G7 group is comprised of the US, Japan, Germany, France, Canada, Italy and the UK.

G7 ministers indicated greater flexibility in considering further co-ordinated intervention following the appeals from Washington. The Bank of Canada last week played its part in a $180-billion injection of liquidity into money markets, led by the Federal Reserve.

The Bank of Japan on Monday injected another 1.5 trillion yen ($14 billion) into money markets as stocks in Japan opened sharply higher. The Japanese central bank injected 11 trillion yen into the system last week.

The Securities and Exchange Commission in concurrence with the UK's Financial Services Authority, had also banned short selling in 799 financial stocks for the next 10 days since millions of Americans have their pension and savings in the money-market funds.


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G7 pledges support sans cash to Paulson plan