World leaders in huddle over US, Europe debt crisis

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Policymakers from across the world engaged themselves in emergency huddles today to discuss the twin-trouble of an unprecedented downgrade in the US' credit-worthiness and the debt crisis in Eurozone.

The two issues have been the major reasons for the meltdown in global markets last week, when more than USD 2.5 trillion was wiped off from investors' wealth, and policymakers were seen debating over ways to avoid further turmoil.

The Indian market has also been severely affected with a loss of about Rs 4 lakh crore (about USD 90 billion) in last four trading sessions. This included a loss of Rs 1.3 lakh crore on Friday itself when the markets slumped to their lowest levels in more than a year.

The weekend development of S&P's downgrading sovereign long-term credit rating of the US from the top- notch 'AAA' level is widely expected to further aggravate the troubles when the global markets resume trading on Monday.

Sensing troubles ahead for the markets, global leaders and policymakers were seen holding emergency discussions on a Sunday.

As per reports from South Korea, the finance deputies of G-20, the group of 20 major economies of the world, discussed the US downgrade as also the Europe debt crisis through a conference call.

The reports from Japan, on the other hand, talked about G-7, the group of seven large developed economies, planning to discuss the situation later in the day.

The European Central Bank also called an emergency meeting, while French President Nicolas Sarkozy is said to have discussed the US downgrade with the British Prime Minister David Cameron.

A host of the countries, including the UK, France, Japan and South Korea, have rallied behind the US while reposing their faith in the US treasury bonds, although China has questioned the adequacy of efforts taken by the United States to tackle its debt situation.

China has also said that Asian exporters would be among the biggest victims of the US economic crisis. China is the single-biggest foreign holder of the US treasury bonds, while Japan and UK are among other prominent holders.

On its part, the US hit back at Standard and Poor's, one of the world's three largest rating agencies, saying that its flawed analysis of US debt situation has raised questions about its own credibility and integrity.

US President Barack Obama has requested lawmakers to set aside their political differences and work together towards recovery in the world's largest economy.

For its downgrade action, S&P has cited the inability of the US politicians in tackling the country's bulging debts and deficit levels as a key reason.

In India, the Finance Minister Pranab Mukherjee admitted on Saturday that the rating downgrade for the US would have an adverse impact, but there was no need to panic.

"There is a crisis, but I am not unnecessarily worried. There is no point of pressing the panic button," he said.

Mukherjee said that the downgrade would further aggravate the global economy, which is still reeling from the meltdown in 2008. He, however, said that India would 'continue to achieve appreciable growth despite negative sentiments across the world'.