G-7's 'inaction' raises risks of further mkt chaos

New York, October 11:: The decision of the Group of seven (G-7) to stick to generalities may raise risk of further market chaos as many investors and traders had been hoping for a dramatic accord such as an agreement to guarantee bank debts, according to analysts.

President George Bush has invited G-7 finance ministers to the White House for breakfast today but the Wall Street Journal said that it seemed unlikely the gathering will produce a breakthrough.

The G-7 includes the US, Japan, Canada, the UK, Italy, France and Germany.

Among the guidelines, countries agreed to use all tools to prevent systemically important financial institutions from failing; to ensure that bank-deposit insurance programs are solid; to ensure that banks can raise capital from private or Government sources; to take steps to unfreeze credit and money markets, and ensure that financial institutions have access to liquidity.

But in analysing the principles, the Journal said they are vague enough that they could be interpreted in many ways, which for some countries may include such dramatic action as guaranteeing bank debt, as the UK has already done.

Referring to the principle that no country should take a step that worsens conditions in another country, the paper recalled that during the 1930s, countries raised trade tariffs in a desperate effort to protect their own industries, but ended up worsening the Great Depression.

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