Page last updated at 06:16 GMT, Monday, 13 October 2008 07:16 UK

G7 acts, but will it be enough?

By Andrew Walker
Economics Correspondent, BBC News, Washington

G7 finance ministers
G7 ministers are hoping that the market gloom will begin to lift

It has been a fast moving weekend in Washington.

The media centre in the International Monetary Fund (IMF) is a depressing basement two levels below ground with no natural light at all, but metaphorically, it is a good vantage point for watching it all.

After another dismal week on Wall Street the stock market managed to clamber back from its lows towards the end of Friday.

That was partly on the expectation, or at least the hope, that G7 Finance Ministers would come to the rescue.

Bases covered

Their communiqué duly emerged, after the markets closed.

It covered all the main bases - putting public capital into the banks, ensuring no big ones fail and doing everything to get the credit markets flowing again.

IMF head Dominique Strauss-Kahn
The IMF said rich nations had so far failed to restore confidence

But it did so in a rather open-ended fashion.

The day after the G7 meeting, the French Finance Minister Christine Lagarde said that a Paris summit of the countries using the euro, joined by Gordon Brown, would put "meat on the skeleton", filling in some practical detail about how the euro countries would put the G7 principles into operation.

And that is more or less what it did.

Meanwhile in Washington, the US financial rescue plan has evolved.

There is now more emphasis on the idea of the government taking stakes in struggling banks. And the British financial rescue has also moved ahead rapidly.

And all the time, the G7 has been pressed by the IMF to get on with it.

Serious mood

The mood here doesn't really match the panic that has gripped the markets at times, but it is very serious.

Even President George W. Bush took the time to drop into the IMF to meet a group of finance ministers. It was his first time on the premises.

No end of IMF officials, from managing director Dominique Strauss-Kahn down, have called this the worst financial crisis since the Great Depression.

The wider economic consequences are nowhere near that bad.

The IMF's chief economist, Olivier Blanchard, told me very firmly that things will not deteriorate that far.

Still, the IMF's forecast is pretty bleak. The second half of next year will see a recovery that is "unusually gradual".

When that forecast was published, Mr Blanchard said that more action was needed. But he thought the fear in the markets would prompt governments to move.

It looks like he may have been right. Let's see if what they have done will do the trick.

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