This year’s G7 summit had a distinctly different tone to last’s.
“The global economy is in its fifth year of robust growth,” began the statement from finance ministers from the G7 rich nations in October 2007.
This year, finance ministers acknowledged that “The current situation calls for urgent and exceptional action.” A reality that cannot be overstated.
The pressure is immense: if rich nations cannot agree this weekend on a plan to stem the banking crisis, the panic seen in financial markets on Friday will be nothing compared to what happens tomorrow.
Reeling from the loss of trillions of dollars of wealth, investors worldwide had pinned their hopes on decisive action from the G7.
So, what can we hope for? Firstly, this is a global crisis that demands a global solution. As yet we have seen only country specific schemes; this weekend must produce a global plan.
Second, we need practical steps and not fluffy rhetoric. A timetable should set out the steps to be taken by all countries, and when they will take them.
In the short term, countries need to work together to get financing flowing. This will require capital injections from governments and officials increasing liquidity by underwriting all lending between banks.
Interest rates ought to be cut and governments must start raising public spending or cutting taxes. Officials should also be prepared to suspend trading in securities in the banking and insurance sectors.
These actions are aimed at the short term, at restoring stability to banks rather than reforming them.
These steps certainly do not replace the need for an overhaul of the financial system. But that must come later.
Right now, the priority now is to stop a financial crisis turning into a depression.