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Business

World's Eyes on G7 Meeting as Financial Crisis Deepens

Policymakers from the world's leading economic powers face huge pressure Friday to tackle the financial crisis as European and Asian stocks tumble amid growing fears of a global recession.

A trader buries his head in his hands on the stock market floor

Recession is looking inevitable

Stock markets around Europe fell sharply on Friday, Oct 10 after earlier dramatic share price plunges in Asia, raising the pressure on financial policymakers from the world's seven richest nations meeting in Washington to come up with a new plan to contain the crisis.

London and Frankfurt erased more than 10 percent and Paris more than nine percent as market turmoil showed no sign of easing, despite coordinated interest rate cuts and billions of dollars' worth of cash injections.

London's FTSE 100 index of leading shares nosedived 10.20 percent to as low as 3,873.99 points -- the first time below 4,000 points since July 3, 2002 -- before pulling back to show a loss of 5.08 percent.

Frankfurt's DAX 30 also shed more than 10.0 percent and in Paris the CAC 40 dived 9.68 percent, before both markets trimmed their losses somewhat.

Earlier, stocks in Tokyo ended Friday trading lower, with the benchmark Nikkei 225 Stock Average plunging below the psychologically significant mark of 9,000 points for the first time in more than five years.

The fresh wave of worries drove up the gold price by more than 4 per cent with the deepening concerns about the economic outlook sending the oil price down by about 5 percent.

G7 under pressure to take global action

US Treasury Secretary Henry Paulson, who will host the G7 finance ministers at the US Treasury next door to the White House, said the meeting was intended to review steps already taken and ways to "further enhance our collective efforts."

Participants are under a lot of pressure to take constructive steps towards coordinated moves to stem the crisis.

British Prime Minister Gordon Brown called for a global solution to the crisis and urged other countries to adopt Britain's actions to save the banking system.

Other governments should follow Britain in putting money into struggling banks and offering guarantees worth hundreds of billions to persuade banks to start lending to each other, Brown wrote in an article in The Times newspaper.

"Because this is a global problem, it requires a global solution," he wrote.

In Berlin, German Chancellor Angela Merkel said she could not rule out nationalizing any of the country's banks, following similar moves in other European countries such as Britain.

"No possibility can be fully ruled out," Merkel said in Berlin.

Last weekend, Berlin announced a 50 billion euro ($68 billion) rescue package for Germany's fourth biggest bank Hypo Real Estate, one of three of the country's banks that have needed help over the past year.

But Merkel's government has so far not partly or fully nationalized any of its lenders -- unlike Britain, which on Wednesday pledged 64 billion euros ($87 billion) to buy stakes in the country's beleaguered banks.

Bush calls for "common policy"

President George W Bush on Thursday called for a "common policy" between the United States and Europe to address the financial crisis that has threatened the world's economy.

Bush, meeting with Slovak President Ivan Gasparovic, said he discussed "our common desire to work with our European friends to develop a best as possible common policy."

Bush on Wednesday spoke with French President Nicolas Sarkozy, British Prime Minister Gordon Brown, German Chancellor Angela Merkel and Italian Prime Minister Silvio Berlusconi to coordinate efforts to prevent more economic damage.

World "on the cusp of recession"

As well as the G7 meeting, talks will be held at the International Monetary Fund (IMF) in Washington.

IMF chief Dominique Strauss-Kahn said the world was "on the cusp of recession", but could still recover.

He urged countries to act "quickly, forcefully, and co-operatively" to solve the global economic problems.

He said further coordinated action was necessary to calm financial markets: "All kinds of policy co-operation are to be commended."

But he issued a stark warning against countries acting unilaterally to fight the crisis. "There is no domestic solution to a crisis like this one," he said.

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