7 October 2008

A frantic global sell-off sent stock indices haemorrhaging to multiple-year lows and shut down markets for interims in Russia and Brazil as the financial crisis swept from the US across Europe Monday.

European Union leaders sought a common response to the crisis to send a message of reassurance, but one after another, individual nations went their separate ways with corporate bailouts and support of bank accounts.

Finnish financial authorities suspended trading of shares and other "financial instruments" issued by several banks including Glitnir bank, Kaupthing bank and Landsbanki.

In Luxembourg, the 15 eurozone finance ministers met amidst growing fears about the safety of Europe's banks and agreed there should be a European response to the crisis. European Union leaders pledged to take "all the necessary steps" to ensure the stability of the bloc's financial system and protect citizens' savings, according to a joint statement issued on their behalf by the French presidency of the EU on Monday.

Such measures would include the injection of liquidity by European central banks, bailouts for troubled banks and guarantees for deposits, the joint statement said.

The panic unfolded just days after the US government passed its 700-billion-dollar rescue plan for a finance system undermined over the past year by hundreds of billions of dollars in bad mortgage assets, which were bundled and sold as securities to firms in the US and abroad. As a result, world credit has frozen, bringing commercial lending to a near standstill.

Despite the US origins of the crisis, the US dollar rose as investors sought the security of greenbacks amidst the global chaos.

The Washington-based International Monetary Fund (IMF) has been warning for years about the overheated US housing market, and earlier this year even called for just the sort of government buy-up of bad mortgage assets that US Congress passed on Friday.

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