European leaders met in Paris Sunday to forge a coordinated effort for confronting the global financial crisis. VOA's Michael Bowman reports from Washington, the gathering was the latest multi-national effort to contain fallout from a credit crunch that has sparked market meltdowns and threatened worldwide economic growth.
While European leaders gathered in France, the World Bank and the International Monetary Fund continued consultations in Washington, where G-Seven finance ministers met late last week. Although the meeting generated no concrete, immediate actions by the world's top industrialized nations, participants pledged close cooperation to rescue distressed banks, prevent bankruptcies and assure that credit flows resume.
Recent weeks have seen nations employ more aggressive measures to prop up financial institutions, ease tight credit, and reassure panicky investors.
Now, the Bush administration is proposing the federal government invest directly in troubled U.S. banks, which would constitute a partial-nationalization of America's banking sector. Several European countries have already undertaken similar initiatives.
Former Treasury Secretary Lawrence Summers says strengthening the banking system is vital.
"The stock market is merely the sideshow in this circus," said Summers. "It is the banking system that has to be put back together, and it has got to be put back together fast."
Summers was speaking on ABC's This Week program.
Last week saw most major stock markets fall by a record 20 percent or more.
Only concrete, coordinated action by governments around the world can stop the slide, according to the head of the Washington-based Institute for International Economics, Fred Bergsten.
"We are in the midst of a crisis of confidence. The financial markets are near panic. They need reassuring steps from the governments and the central banks," said Bergsten. "The governments and central banks need to take a series of very specific measures to get the credit markets functioning again, to get the banks lending again, to get the economy moving forward again. We need those decisions in the next day or two to get confidence back on track."
Bergsten was speaking on CBS' Face the Nation.
The worldwide credit crunch began in the United States, which has weathered a wave of home foreclosures after a prolonged period of lax lending standards that saw millions of Americans acquire mortgages they could not afford.
In recent weeks, the financial contagion has spread to Europe, Asia, and scores of developing nations.
To combat the problem, the Bush administration has propped up and taken over failing U.S. financial institutions, championed a massive government rescue package, and tried to make it easier for businesses to finance short term needs.
A growing consensus among economists and government officials holds that while individual nations must take steps on their own, only coordinated global efforts can stem the crisis.