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Financial crisis: US, UK may converge on similar blueprint

Source: PTI
October 10, 2008 15:31 IST
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The US and UK appear to be 'converging' on a common strategy to tackle the financial crisis in economies worldwide, which the White House hopes will result in a co-ordinated response.

"The United States and Britain appear to be converging on a similar blueprint for stemming the financial chaos sweeping the world...," The New York Times said.

The report, quoting officials, said that British and American plans, though far from identical, have two common elements: "Injection of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans."

Both plans would take the centre stage when US President George Bush meets finance ministers from the world's richest nations on Saturday.

Bush has invited finance ministers of Britain, Italy, Germany, France, Canada and Japan.

"With credit markets still frozen and stock markets around the world in a deep swoon, there is a growing consensus that the crisis is now so fast-moving and harmful to the global economy that it demands an unprecedented degree of worldwide coordination," the report published online on Thursday said.

According to the New York Times, the openness of the US Treasury to direct infusion of cash is a 'remarkable change in tone' from a few weeks ago, when Treasury Secretary Henry M Paulson and the Federal Reserve Chairman Ben S Bernanke discouraged such actions in testimony before Congress.

"Treasury officials, however, said the emphasis changed in the last week, largely because stock markets kept spiralling down," it noted.

British Prime Minister Gordon Brown in a letter to French President Nicolas Sarkozy had suggested an option guaranteeing short and medium term loans between banks. By persuading banks to resume lending to each other, the plan aims to shake loose the paralysed credit market.

"This is an area where a concerted international approach could have a very powerful effect," Brown was quoted as saying in a two-page letter on Thursday.

Administration officials are discussing aspects of the British proposal but said different economies have different rules that complicate a single joint action, the New York Times said.

"Still, recapitalising the banks and jump-starting their lending are at the top of the list of remedies that many economists are now suggesting. By acting in concert, countries can maximise the punch of their actions, these experts said, while avoiding distortions that occur when countries go different ways," the report added.

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