London: Britain unveiled a $437 billion bank rescue on Wednesday as markets around the world bombed over fears that the worst financial crisis in decades has still not been mastered.
Tokyo stocks slumped more than 9% and European shares also fell heavily. Central bank moves to increase the amount of available credit did little to calm the panic.
Britain announced a £50 billion ($87 billion) part nationalisation of the country’s eight main banks. The Bank of England will also extend a £200 billion ($350 billion dollar) credit line for banks.
The British taxpayer will in return get major stakes in HSBC, Royal Bank of Scotland, Barclays, HBOS, Lloyds TSB, Standard Chartered, Abbey and Nationwide Building Society.
Finance minister Alistair Darling said the move by the centre-left Labour government was a bold response to “extraordinary times.” Talks over the public stakes were only completed a few hours before the announcement.
“The taxpayers’ interest is being protected. I’m very clear that in return for all this, the taxpayer has got to see some upside,” Darling told Sky News television.
The British package followed desperate efforts by other governments.
The European Central Bank said it would pump $70 billion into interbank money markets in one-day loans Wednesday, raising the daily amount by $20 billion.
The US Federal Reserve said Tuesday it would buy up short-term debt - extending its move into the economy - and central bank chairman Ben Bernanke strongly hinted that a US interest rate cut was on the cards.
Japan and Australia pumped billions of dollars into the banking system and Hong Kong slashed interest rates, but there was no stopping the market misery.
“These sorts of measures aren’t working anymore,” said Hiroichi Nishi, a broker at Nikko Cordial in Japan. “It’s like you’re trying to pump blood into a heart with clogged arteries.”
The Tokyo stock market suffered what amounted to an indiscriminate sell-off, with investors dumping shares across the board, sending the Nikkei down 9.38% - its biggest one-day plunge since the stock market crash of 1987.
London’s FTSE 100 index fell 1.64% despite the government billions, Frankfurt stocks opened with a loss of 1.68 percent and Paris was down 3.7%.
Australia shed 5.0% and Hong Kong lost 7.0%.
On Wall Street, the Dow Industrial average gave up 5.1% on Tuesday to close at a new five-year low.
US President George W. Bush discussed the economic meltdown with leaders of Britain, France and Italy, seeking a common strategy ahead of crisis talks between the Group of Seven major economies in Washington on Friday.
“I was on the phone with them this morning to ensure that our actions are closely coordinated. We live in a globalised world,” Bush said. “We want to make sure that we’re effective.”
The grim toll on the world economy is becoming clearer with as much as $2 trillion wiped off the value of US retirement plans in the last 15 months, the head of the Congressional Budget Office, Peter Orszag, said in Washington.