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DateLine Thursday, 2 October 2008

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World urges US to get a grip on banking crisis

Europe led a chorus of demands Tuesday that the United States get a grip on its financial crisis, as governments scrambled to shore up fragile banks and restore confidence in nervous markets.

The failure of the US Congress to approve a 700-billion-dollar plan to bail out tottering Wall Street banks rattled European leaders struggling to protect their own institutions from the global storm.

In Berlin, German Chancellor Angela Merkel said: "I expect that the rescue package in the United States will be approved this week, because it is needed so that new confidence can be established in the markets." French Finance Minister Christine Lagarde said: "It's obvious that there is a lot of hope in various financial markets riding on the success of this plan."

In Brussels, European Commission spokesman Johannes Laitenberger said: "The US must take its responsibility in this situation, must show statemanship for the sake of their own companies and for the sake of the world."

US President George W. Bush has thus far proved unable to persuade lawmakers from his own Republican Party to back the Wall Street rescue plan, but echoed European calls for action. "The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act," he warned at the White House, vowing that efforts to secure a rescue package would continue.

In Asia, the Japanese government has been battling to pass its own 17-billion-dollar supplemental budget to kick-start the economy and, while India insists its stock market is sound, Delhi called for US action. "It's agreed by everyone a bail-out is necessary. How the US Congress will reconcile the views of two major political parities, it's not for me to comment," said Finance Minister Palaniappan Chidambaram.

In Paris, President Nicolas Sarkozy met bankers to urge them to maintain a supply of credit to business, after France, Belgium and Luxembourg pumped 6.4 billion euros (9.2 billion dollars) into the beleaguered bank Dexia.

"Our ambition was to have very strong political involvement in order to send a signal to the markets," Belgian Prime Minister Yves Leterme told journalists in Brussels after the Dexia deal was reached.

With commercial banks reluctant to risk loaning money to each other, the European Central Bank attempted to release liquidity into the credit market by auctioning off 50 billion dollars (35 billion euros) in one-day loans.

An earlier auction of 30 billion dollars was massively oversubscribed.



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