Europe's debt crisis prompts central banks to provide dollar liquidity
European and US stocks surge on news that world banks will flood markets – but Lagarde warns of 'dangerous' new phase
Larry Elliott, economics editor and Dominic Rushe in New York
guardian.co.uk, Thursday 15 September 2011 16.12 EDT
Fears of a deepening of Europe's debt crisis have prompted the world's leading central banks to pump US dollars into the financial system, in a co-ordinated action designed to boost market confidence.
The Bank of England joined the US Federal Reserve, the European Central Bank, the Swiss National Bank and the Bank of Japan on Thursday to announce that they would flood money markets with dollars over the coming months.
The move, on the third anniversary of the collapse of the US investment bank Lehman Brothers, sent shares soaring in banks heavily exposed to debt default by Greece and the other struggling members of the 17-nation eurozone. The euro, which had been falling in recent days, rebounded, rising roughly 1% in European trading on Thursday.