Bloomberg reports initial discord among the G-7 nations meeting in Washington this weekend (via Naked Capitalism). Italy had made its concerns public before the meeting.
The draft communiqué under consideration is ``too weak'' and fails to reflect the gravity of the financial turmoil, Italian Finance Minister Giulio Tremonti told reporters in Washington before the talks began. ``We won't sign it.''
But, Tremonti softened his early position after the meeting, according to a New York Times report. The G-7 meeting thus produced an agreement, but one short on details. So the fear remains of the consequences issuing from an uncoordinated response to the crisis.
If other countries do not follow the same course as Britain [a bank recapitalization program]…, it could destabilize the financial system, because money may flow to Britain from countries without those same guarantees.
Doubt remained the predominant sensibility among the G-7 members, according to the Financial Times.
No G7 official was sure the plan would work, so deep is the global financial crisis. If it does not, the next steps would be one of two nuclear options: either to guarantee all liabilities of banks, effectively nationalizing the financial system, or for governments to seek to bypass financial institutions by lending direct to companies and households. Officials hope they will not have to contemplate these options.
The Wall Street Journal reports that Congress might consider passing a stimulus package after the election. President Bush will likely oppose such legislation, according to the Journal article.
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