March 11: French President Nicolas Sarkozy, left, speaks with British Prime Minister David Cameron during an EU Summit in Brussels.AP
Financial officials from the Group of 20 major economies reportedly held an emergency conference call Sunday to the discuss the debt crises in the U.S. and Europe following several days of market panic and a downgrade of the U.S. credit rating.
"I expressed our country's position on the (G20 conference) call that there will be no sudden change in our reserve management policy," South Korean Deputy Finance Minister Choi Jong-ku told Reuters.
Standard & Poor's adjustment of the U.S. credit rating Friday night added to growing fears over debt levels and economic growth in the world's biggest economy and in large European nations such as Italy and Spain. The downgrade from an AAA rating to an AA-plus is also set to hurt Europe, whose economy is closely linked to the U.S. and whose weak members depend on strong demand abroad for their goods to help them grow.
Early Sunday morning, markets in the Middle East tumbled at the start of their first day of business since the downgrade, even as some experts said that the rating change may not be as bad as originally thought.
"Investors have voted and are saying the U.S. is going to pay them." Mark Zandi, chief economist of Moody's Analytics said. "U.S. Treasuries are still the gold standard."
Zandi noted that neither his parent organization, Moody's, nor Fitch, the other of the three major rating agencies, had downgraded U.S. debt.
"Anytime there's a problem anywhere on the planet, investors come to the safety of the U.S., and they don't go anywhere else," Zandi said.
Many economists see the world's big central banks as the last line of defense at this moment in the crisis, after policymakers in Europe and the U.S. have failed to agree on the kind of shock-and-awe moves that many investors demand.
Many investors have also been calling on the U.S. Federal Reserve to start pumping money into the American economy again to help underpin the slowing economic recovery.
Concerned that the U.S. downgrade will deal a significant blow to consumer and business confidence, as well as world financial markets, the Group of Seven industrialized nations will discuss the U.S. credit rating and the eurozone sovereign debt concerns before Asian markets open for trading Monday.
Both Italian Premier Silvio Berlusconi and EU Monetary Affairs Commissioner Olli Rehn on Friday called for coordination between G7 countries, saying the crisis has to be tackled on a global level.
On Saturday, British Prime Minister David Cameron spoke by telephone with President Nicolas Sarkozy of France to discuss the euro area and the U.S. debt downgrade, Cameron's office said in a statement. "Both agreed the importance of working together, monitoring the situation closely and keeping in contact over the coming days," it said.
The G-7 contacts come after one of the worst weeks in global financial markets since the collapse of U.S. investment bank Lehman Brothers in 2008.
Contributing to the market slump was the eleventh-hour deal in Washington Tuesday to raise the U.S. debt ceiling, a move not effective enough to avoid the credit downgrade.
John Chambers, managing director and chairman of the S&P sovereign ratings committee, explained to Fox News on Saturday that the downgrade was "motivated by a number of factors," including the gridlock in Washington.
Chambers warned that the agency could downgrade U.S. debt a notch lower in the next six to 24 months if Congress doesn't cut another $1.6 trillion over 10 years to reach the $4 trillion figure.
The probability of another downgrade is 3-1 odds, he said.
Asked whether the U.S. can regain its triple-A rating, Chambers said the five governments that managed to recover their rating did so in nine to 18 years.
Fox News' Stephen Clark and the Associated Press contributed to this report.