Bank of England and Treasury must act decisively to head off a recession

10.20.00am UTC (GMT +0000) Mon 24th Mar 2008

Central bankers stepped up efforts to pump funds into the global financial system today as Mervyn King, the Governor of the Bank of England, met heads of the UK's five biggest banks following days of stock market turmoil and rumours of market manipulation by short-sellers. Liberal Democrat leader Nick Clegg urged the Bank of England and the Treasury to act decisively to head off a recession, in a statement he said:

· Bank of England must inject more cash into the UK money markets to restore stability and to stop interest rates from being driven upwards.

· Bank of England must consider providing money to new players in the financial markets - secured against appropriate assets.

· Bank of England, with the Treasury, need to restore confidence in the banking system by undertaking to act swiftly to prevent any major bank failure - using the model of the rescue operation on Bear Stearns in the US.

· Treasury should urgently make preparations to avoid mass home repossessions - using the same options which are now being considered actively in the United States. [Times]

Nick Clegg said "Extreme times require extreme action, and there is no doubt that our economy is now in real danger. There now needs to be decisive action to stop the problems in the City from wrecking the rest of the economy."