As the head of the International Monetary Fund (IMF) warned yesterday that bank debt was pushing the global financial system to the brink of meltdown, world leaders talked up a co-ordinated response but offered disappointingly few details about what would be done.
Investors reeling from the worst week on stock markets since 1987 had hoped that a global initiative to guarantee bank lending might have been announced in Washington where finance chiefs from 185 member nations gathered for the fund's annual meeting. It wasn't.
The world's seven richest nations - the G7 - vowed to take "all necessary steps" to unfreeze credit markets and ensure banks can raise money but they offered no specifics on a collective course of action to restore confidence.
In a surprisingly brief statement after a three and a half hour meeting, the G7 stopped short of backing a British plan to guarantee lending between banks, something many on Wall Street saw as vital to end growing market panic.
The G7 agreed on a five-point action plan, committing members to use "all available tools" to support major banks to prevent their failure.
But it was immediately criticised for being vague on detail and lacking a timeframe for actions.
Kenneth Rogoff, a Harvard University professor and former IMF chief economist, said the G7 would have been better served adopting some version of the British plan so that banks would feel confident enough to loosen their grip on lending.
"Saying that they'll take all steps necessary leaves hanging the question of whether they know what is best and necessary. It was a signature moment for the G7. I think markets are going to be very disappointed."
Global stock markets are coming off their worst week of the crisis so far.
On Friday New Zealand's NZX-50 closed down nearly 5 per cent taking loses for the week of nearly 11 per cent.
It was among the best performers.
Wall Street closed down again on Friday, with the S&P 500 having its worst week since 1933 - down 18 per cent. It is down 39 per cent for the year.
In London the FTSE 100 also slumped again taking its loses for the week to more than 20 per cent.
"Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," IMF chief Dominique Strauss-Kahn said after the fund's annual meeting yesterday. However he hailed "the first global co-ordination" to tackle the financial crisis, saying all 185 institution members had signed up to an action plan.
"It is so important that the first coordination took place today in the IMFC when emerging market economies and low-income countries agreed with the principles and actions decided by the G7 yesterday."
That enthusiasm may not be shared by markets - at least until more definite proposals are announced. But the US Treasury's Henry Paulson said it was "naive" to think that the G7 would endorse a one-size-fits-all approach to ending the credit crisis because there were major differences between the countries and their financial systems.
But even as Paulson and his fellow finance ministers insisted that they were working as fast as possible, there were signs the economy was credit-starved and deteriorating fast.
European Central Bank President Jean-Claude Trichet said markets needed time to digest a series of dramatic steps taken by world central banks, including pouring billions of dollars into financial markets and lowering interest rates in the broadest co-ordinated cut on record.
An emergency meeting of European leaders was scheduled to be held last night to discuss a bank rescue package - taking Britain's initiative as a reference point.
French President Nicolas Sarkozy said euro zone countries were working on a joint solution. He planned to meet with British Prime Minister Gordon Brown shortly before the gathering.
Britain's rescue plan, launched last week, makes available £50 billion of taxpayers' money for injection into its banks and, crucially, to underwrite interbank lending which has all but frozen around the globe.
Germany was also considering injecting capital into its banks, Chancellor Angela Merkel said on Saturday.
The talks shifted to the World Bank last night - which also held its annual meeting Washington.
World Bank President Robert Zoellick, said the crisis could be a tipping point for many developing countries. He said 28 countries are already fiscally vulnerable because of twin shocks of rising food and fuel prices. But they are unlikely to receive any increase in aid from budget-tightening developed countries.
"The poorest cannot be asked to pay the biggest price," Zoellick said. "For the poor, the costs of the crisis could be lifelong."
* IMF warns that world financial system is on brink of meltdown.
* G7 nations vow to fight credit crunch.
* All 185 IMF nations commit to co-ordinated plan, but no details.
* European leaders were to meet last night to consider a broader bailout of banks.