WASHINGTON - FINANCE chiefs from the Group of Seven industrialised nations were due to meet in Washington on Friday in search of a solution to the growing financial firestorm.

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 on Friday, adding to the turmoil for finance ministers from the G7 to discuss.

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

US President George W. Bush agreed to host the G7 finance ministers on Saturday.

Mr Bush vowed to take 'strong action' against the crisis and emphasised 'our common desire to work with our European friends to develop a best-as-possible common policy'.

In Tokyo, Japanese Premier Taro Aso, chair of the Group of Eight rich nations, said he would call an emergency G8 summit if 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,' Mr Aso told reporters.

Japan is the chair this year of the G8, 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.

Mr Marc Chandler, analyst at Brown Brothers Harriman, said despite the grim outlook, the G7 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.'

Mr John Ryding, an economist at RDQ Economics, said the move by Britain to inject capital into troubled banks offered a 'glimmer of hope,' especially after Washington said it would consider similar actions.

'It will require the G7 finance ministers on Friday to see the actions that need to be taken but the pieces of the puzzle to the solution of the financial crisis will be in front of the finance ministers when they meet in Washington,' Ryding said.

'For this, we have to thank the (British) Prime Minister Gordon Brown and his Chancellor of the Exchequer Alistair Darling. Our hats are off to them and, if Treasury Secretary Henry Paulson follows their advice, we could finally have found our wider firebreak.'

Mr Brown urged world governments on Friday to follow Britain in its 'ground-breaking' moves to put money into struggling banks and guarantee inter-bank loans, as Britain did this week in a multi-billion-pound rescue package.

But in a sign that unity was weak, the head of the International Monetary Fund, Mr Dominique Strauss-Kahn, said that European Union countries should work together and avoid unilateral steps to fight a global financial crisis.

'Cooperation and coordination in actions is the price of success. All kinds of cooperation have to be recommended,' Mr Strauss-Kahn said at a news conference ahead of the annual meetings this weekend of the IMF and World Bank.

Unilateral action 'has to be avoided, if not condemned,' he said.

BNP Paribas analysts said 'signs of hope are finally emerging that a globally coordinated approach to the financial crisis could be agreed between policy makers at Friday's G7 meeting,' they wrote in a research note.

'Indeed, the UK's three-pronged approach to the crisis announced on Wednesday has been gaining praise, and there are also suggestions that the US could adopt similar measures.'

The US approved a 700-billion-dollar (S$998 billion) rescue package for financial firms last week that will see the Treasury buy up toxic debt from banks in a bid to encourage them to continue lending.

On Wednesday, leading central banks unleashed coordinated interest rate cuts in their latest attempt to counter the financial problems caused by bad debts linked to declining house prices in the United States. -- AFP