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Alistair Darling calls for world’s financial leaders to take decisive action
£2.7 trillion wiped off the global value of shares as confidence collapses

A frenzied day of panic selling on stock markets across the world capped a week of extraordinary financial mayhem in which £2.7 trillion was wiped off the value of shares globally.

Finance ministers and central bank chiefs from the West’s leading economies attempted last night to quell the markets’ fears with moves to shore up their banking systems and prevent a full-scale meltdown of the world financial system. Such was the level of panic, however, that officials gathered in Washington were forced to contemplate the previously unthinkable: that Britain’s enfeebled banks may face outright nationalisation if Gordon Brown’s £50 billion bailout fails.

As stock markets on both sides of the Atlantic suffered record-breaking falls, ministers and central bank governors from the Group of Seven leading economies strove to piece together a united plan to avert financial cataclysm. In a statement last night the G7 said that the present, extreme situation “calls for urgent and exceptional action” and pledged to make decisive collective moves to stabilise markets. The G7 agreed to “take all necessary steps” to unfreeze paralysed money markets, and ensure that banks could secure new capital “in sufficient amounts to reestablish confidence”.

The US led other leading economies in moving to follow Britain’s scheme to inject capital into their banking systems. Henry Paulson, the US Treasury Secretary, announced that Washington would soon use part of America’s $700 billion (£400 billion) emergency bailout fund to take ownership stakes in vulnerable US banks. The German Government is also working on a similar scheme, it emerged.

The moves came after the Dow Jones industrial average opened on Wall Street yesterday with an 8 per cent plunge. It rose later in the day, but closed 1.49 per cent down at 8,451.

In London, the FTSE 100 index closed down 381.7 points, or 8.9 per cent, at 3,932.1, succumbing to its second-biggest points loss ever. The FTSE 100 has now had 24 per cent of its value wiped out over this week.