European bank split in emergency talks over tackling Italian debt

The European Central Bank (ECB) was last night holding an emergency meeting to decide whether to start buying up Italian government debt in an effort to contain the deepening financial crisis in the eurozone.

As the White House grappled with the United States' economic troubles after a credit-rating agency reduced its standing on Friday, the ECB's governing council – which includes central bank governors of all the eurozone's 17 member states – was conferring by telephone. There were reports that its members were split down the middle on the Italian debt question yet anxious to reach a solution before markets opened today.

German officials in particular were said to want tougher austerity measures enforced before the ECB made any commitment to taking on the debt loads of struggling eurozone members such as Italy and Spain.

Last night, in a sign of British frustration at the division, George Osborne called for more to be done on a co-ordinated basis to reassure the markets.

"By its nature, a global crisis cannot be solved by countries acting alone," the Chancellor said. "Eurozone countries must now act swiftly to deliver on what they have promised. Euro-area institutions need to do whatever is necessary to ensure financial stability."

The calling of the ECB meeting came as shares listed on Middle East stock markets plunged yesterday in reaction to Standard & Poor's move to cut the US credit rating. Markets in Abu Dhabi, Qatar and Dubai all fell more than 2.5 per cent, while the market in Saudi Arabia dropped by 5.5 per cent on Saturday.

Finance ministers and central bankers from the G7 were also due to hold emergency talks by telephone before markets open in East Asia today in an attempt to forge a global response to the eurozone crisis and ease fears about the recent downgrading of US-creditworthiness.

In an effort to contain the economic crisis in Italy, the country's prime minister, Silvio Berlusconi, announced new measures on Friday aimed at speeding up deficit reduction and financial reform. The moves were designed to allay market fears that Rome would be unable to sustain such a high level of debt while economic growth remained slow. However, concern that the package would not be enough to calm the markets prompted the ECB to consider intervention.

Middle East stock markets fell, meanwhile, in reaction to the move to cut the US's credit rating. Markets in Abu Dhabi, Qatar and Dubai all fell 2.5 per cent, while the market in Saudi Arabia fell 5.5 per cent.