Major central banks around the globe took coordinated action on Wednesday to ease the strains on the
world's financial system, saying they would make it easier for banks to get dollars if they need them.
Stock markets and the euro rose sharply on the move.
The European Central Bank, US Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland are all taking part.
As Europe's debt crisis has spread, the global financial system is showing signs of entering another credit crunch like the one that followed the 2008 collapse of US investment bank Lehman Brothers. The possibility that one or more European governments might default have raised fears of a shock to the global financial system that would lead to severe losses for banks, recessions in the United States and Europe, and a stranglehold on lending.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the banks said in a joint statement.
The central banks agreed to reduce the cost of temporary dollar loans they offer to banks - called liquidity swaps - by a half percentage point. The new, lower rate will be applied to all central bank operations starting on Monday.
Non-U.S. banks need dollars to fund their U.S. operations and to make dollar loans to companies that need the U.S. currency. The dollar is the world's leading currency for central bank reserves and is widely used in international trade.
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