A meeting of the finance ministers and central bankers of the Group of Seven (G-7) was being held amid a stunning loss of confidence in the global financial system that has sent markets into a freefall.

The major industrial powers have already pumped massive amounts of liquidity into the global banking system in an effort to unclog credit markets, and led a coordinated cut in interest rates.

But panic has still gripped the markets, which have hit multiyear lows in the United States and most other countries amid loss of confidence.

Stock exchanges from Tokyo to London suffered more staggering losses Friday, adding to the turmoil for finance ministers from the G-7 to discuss.

The meeting brings together ministers and central bankers of the United States, Germany, Japan, France, Britain, Italy and Canada.

U.S. President George W. Bush also agreed to host the G-7 finance ministers on Saturday.

British Chancellor of the Exchequer Darling told National Public Radio: “I think the key is to ensure that governments all over the world act together, firstly to stabilize the banking system ... (and to) do whatever it takes to maintain stability.”

Germany called on Friday for a set of global rules to help tackle the global financial crisis, saying it was time to put an end to ad hoc solutions.

“We need global rules for the markets,” German Finance Minister Peer Steinbruck said.

In Tokyo, Japanese Premier Taro Aso, chair of the Group of Eight nations, said he would call an emergency G-8 summit if the finance chiefs meeting in Washington did not reach a deal on the global credit crisis.

“If things cannot be concluded, as the chair we will call one,” Aso told reporters.

Japan is the chair this year of the G-8, which includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States. The G8 leaders held their regular annual summit in northern Japan in July.

In Milan, Italian market authorities said they had extended a ban on the so called “short” selling of shares to all stocks quoted in Italy until the end of October, amid a global stock price collapse.

Marc Chandler, analyst at Brown Brothers Harriman, said despite the grim outlook, the G-7 still has some options to help calm the storm.

“We are hesitant to spread rumors, but there is increasing speculation that the G7 meeting could take another major step and that is to guarantee all interbank lending,” he said.

“This talk is having a demonstrable impact on the interest rate markets. It is difficult to evaluate the likelihood, but it is important to note that officials generally recognize that current measures are not yet sufficient to turn the corner of the crisis.”

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