G7 rushes out statement to calm markets

THE G7 group of industrialised nations rushed out a statement before the open of Asian bourses this morning, pledging to take “coordinated action where necessary” to prevent serious disruption and ensure liquidity in markets.

Finance ministers from the US, UK, Italy, Germany, France, Japan and Canada also said they would “cooperate as appropriate on foreign exchange” in a signal they are willing to intervene in forex markets if “excessive moves adversely impact financial stability”.

Meanwhile, the G7 finance ministers welcomed pledges from Italy and Spain to “strengthen their fiscal discipline”, effectively paving the way for the ECB to purchase their bonds.

An aide to George Osborne, who took part in the call, said he would call on the Eurozone states to implement the new €440bn bailout fund, the European Financial Stability Facility, as soon as possible. It is not expected to be up and running until September, once member states have approved it.

The issuance of Eurozone bonds, which would effectively see the better-off northern states underwrite the debt of their stricken southern neighbours, also “merits serious consideration”, Osborne was expected to argue. Germany is currently vehemently opposed to such a solution.

In comments released after the conference call, Osborne said: “By its nature a global crisis cannot be solved by countries acting alone. Eurozone countries must now act swiftly to deliver on what they have promised.”

Meanwhile, Osborne continued to make the case for rapid deficit reduction, pointing out that the UK government’s borrowing costs are at near-record lows thanks to the government’s austerity measures – despite having the highest deficit in the G7.

He said: “Individual countries need to demonstrate beyond doubt that they have credible plans to deal with excessive deficits.”