As finance ministers from the G7 group of wealthy nations prepare to meet in Washington the International Monetary fund chief has issued a stark warning to countries taking unilateral action to fight the financial crisis.
Dominique Strauss-Kahn urged countries to act quickly, forcefully and cooperatively to combat the global downturn.
‘‘There is no need for a collective fund. Everyone can act for their country provided that when acting, any decision are made in agreement with others,” he said.
“For example, the Irish have recently decided to give a guarantee to depositors. That is, we must give a guarantee to investors. But it must be the same everywhere else. Guaranteed money leaves a country to go to the place where it seems best assured. Instead of solving problems, it only aggravates the problems of its neighbour.’‘
The warning comes after another turbulent week on the world markets.
The UK government pledged a further 500 billion euros for British banks.
The Dutch government is preparing to inject 20 billion euros of funding to prop up financial institutions such as Fortis.
The President of the World Bank Robert Zoellick is calling for a new order in the way the world’s finances are run. He says the current world leadership structure is ill-equipped to deal with the global crisis.
He wants the G7 group to be doubled in size to include rising powers such as Saudi Arabia, Russia, China, Brazil, India, Mexico and South Africa.