As the European Central Bank prepares for emergency talks, David Cameron joins world leaders in a battle to calm economic fears ahead of stock markets opening on Monday.
The European Central Bank will decide whether to buy Italian government bonds to try to stem the eurozone’s debt crisis from widening in a crucial conference call on Sunday evening.
Twin debt crises in Europe and the United States are causing global market turmoil and stoking fears for future economic growth.
French Prime Minister Nicolas Sarkozy has spoken to Mr Cameron, who is holidaying in Tuscany. “Both agreed the importance of working together, monitoring the situation closely and keeping in contact over the coming days,” a spokesman for Number 10 said.
Meanwhile, the Treasury confirmed that Chancellor of the Exchequer George Osborne spoke to Christine Lagarde, managing director of the IMF, on the phone last night.
A spokesman said they discussed Friday’s downgrading of America’s credit rating by Standard and Poor’s, and the ongoing problems in the eurozone.
While there is still no confirmation of plans for a meeting between G7 finance ministers, it is understood ministers are to hold a teleconference late on Sunday.
French and German newspapers carried grim headlines today, forecasting a second week of market turmoil. Der Spiegel magazine’s front page featured euro and dollar banknotes going up in flames, with the headline “US indebtedness, euro crisis, stock market chaos: Is the world going bankrupt?”.
What to watch as America awakes to financial vulnerability
There are many people trying to play down the significance of Friday's dramatic release by Standard & Poor's that the world's only superpower has been stripped of its AA status, writes Economics Editor Faisal Islam.
No one knows what the impact of this will be in the markets on Monday. What it symbolises however is that start of a fundamental change in how the world economy works...
Read more: What to watch as America awakes on Monday
ECB President Jean-Claude Trichet wants the policy-setting Governing Council to take a final decision on buying Italian paper after Prime Minister Silvio Berlusconi announced new measures on Friday to speed up deficit reduction and hasten economic reforms.
A source said the council would also discuss possible emergency liquidity measures to prevent money markets freezing.
“Trichet wants the governing council to make a final decision on purchases of Italian bonds. If the governing council agrees, the Eurosystem would start on Monday,” the ECB source said, speaking on condition of anonymity.
The Eurosystem comprises the ECB and national central banks of the 17 countries that share the euro single currency.
A source said the ECB meeting had been put back into the evening to see what measures US authorities were prepared to take to calm markets after credit ratings agency Standard & Poor’s downgraded Washington’s AAA rating to AA+.