US stocks plunge amid crisis

The slide comes despite the International Monetary Fund (IMF) reactivating an emergency aid process for countries seeking help in the global financial crisis, Dominique Strauss-Kahn, the institution’s president, said on Thursday.

It also comes a day after the US Federal Reserve and central banks from Europe, Canada and China cut interest rates to contain the market meltdown.

Al Jazeera’s John Terrett on Wall Street says the US market has now lost 20 per cent in October this year alone and said part of the large drop was attributed to US auto giant General Motors being downgraded by analysts, a move that led to its shares dropping 30 per cent.

Ironically Thursday’s market trauma comes exactly one year to the day that the Dow Jones hit an all time high of more than 14,100 points, our correspondent adds.

Both the IMF and World Bank are also due to hold their annual meetings on Friday and over the weekend, while finance ministers from the world’s wealthiest nations – or G7 – will converge on the meetings’ sidelines in Washington DC this weekend for talks on the crisis.

The G7, or Group of Seven, comprises Britain, Canada, France, Germany, Italy, Japan, and the US.

No ‘blame game’

The IMF emergency procedure, developed in 1995, permits payments from the IMF but with swifter approval of the loans and releasing of funds – two weeks at most.

Strauss-Kahn said the organisation had sufficient funds to support the needs of its 185 members, including developed nations.

“We are ready to answer any demand by countries facing problems,” he said.

Also on Thursday Robert Zoellick, president of the World Bank, urged the world’s wealthiest nations to work together on the crisis, telling Al Jazeera “the scope of this problem is much larger than we what we can deal with”.

“In the short term what the G7 needs to do is to try to take the actions it’s starting to take – co-ordinated central bank actions … to try to clean up the assets, to try to make sure there is liquidity in terms of banks being willing to provide funds to corporations and others [and] recapitalise the institutions,” he said.

However, he said the crisis could not be blamed on any particular corporation or the US government.

“I think the problem extends far beyond the Bush administration … it’s not my purpose nor do I really feel this is a blame game, you need to figure out the solution, what happened in the past and move forward together,” he said.

“We’re not a criminal prosecuting institution, it’s my job to try to help poor people.”

Strauss-Kahn earlier on Thursday had warned against unilateral action by EU states, saying it “should be avoided, if not condemned”.

“There’s no domestic solution in a crisis like this one,” he said.

Rate cuts

The markets had appeared to steady in Asia after South Korea, Hong Kong and Taiwan on Thursday also cut interest rates, but as the day wore on stocks began to slide.

Brown had harsh words for Iceland over its handling of the crisis [EPA]

Jose Manuel Barroso, the European commission president, said the 27-nation EU bloc was divided over the need to come up with a universal approach to the turbulence, that has wreaked havoc with world markets.

On Thursday the Dutch government said it would make available 20 billion euros ($27bn) to protect the financial sector, while France, Belgium and Luxembourg agreed to provide state guarantees for efforts by Dexia, the troubled Franco-Belgian bank, to borrow.

The three governments pledged to underwrite new borrowing for the world’s largest municipal lender just days after they and public bodies pumped 6.4 billion euros ($8.7bn) into the bank.

Gordon Brown, the British prime minister, also defended his government’s own bank rescue plan on Thursday and urged his European counterparts to follow suit to help begin easing the global credit crunch.

The UK’s bailout plan – around $875bn – was unveiled on Wednesday and involves the possible part-nationalisation of several of Britain’s main banks, a guarantee for inter-bank lending and the provision of short-term funds for banks.

Brown also harshly criticised the Icelandic government – which has been forced to nationalise three banks – for failing to guarantee British savers’ deposits in its banks.

“What happened in Iceland is completely unacceptable,” Brown told the BBC on Thursday.

“I’ve been in touch with the Icelandic prime minister [Geir Haarde] – I’ve said that this is effectively illegal action that they’ve taken.”

The Irish government has also extended its guarantee of bank deposits to cover those in Irish branches of five foreign-owned institutions.