Business

LONDON - European governments sought to contain the deepening world financial crisis on Wednesday, with Britain stepping in to help its hard-pressed banks and Russia shutting down its biggest stock market for two days. Still, the greatest relief to markets came from a coordinated rate cut from leading world central banks.

After the central banks, including the U.S. Federal Reserve, European Central Bank and Bank of England, stepped in to cut official rates by half a point, markets recovered some of their earlier lows. The British FTSE was down 2.5 percent, Frankfurt DAX 30 blue-chip index was down 3.1 percent, and Paris CAC-40 was off 2.6 percent. All had been deeper in the red before the coordinated cut.

The British Treasury announced it would be investing 50 billion pounds ($87.5 billion) in exchange for stakes in the country's largest banks and building societies, widen the amounts available through an existing short-term bank-credit program to 200 billion pounds and guarantee 250 billion pounds ($437.5 billion) worth of short and medium-term debt.

The partial nationalization of some of the country's leading banks was supposed to put them on a "sounder footing," said Prime Minister Gordon Brown, after Tuesday's precipitous collapse in banking stocks, most notably at Royal Bank of Scotland PLC and HBOS PLC.

Brown and Alistair Darling, Treasury chief, hope that the package of measures will give banks more confidence to start lending to each other.

"This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem," Brown told a news conference.

Tiny Iceland plunged further into financial crisis on Wednesday as it scrapped plans to nationalize a major bank, instead placing it into receivership, and abandoned attempts to put a floor under its falling currency by fixing the exchange rate.

Europe's stock exchanges opened sharply lower in the wake of Japan's worst performance since the stock-market crash in 1987. CAC-40 index in Paris suspended updates for a short time because sell orders were too numerous.

Moscow's MICEX stock exchange, where most of Russia's trading takes place, announced it is shutting until Friday after opening with steep losses. The index dropped 14 percent in its first half-hour Wednesday.

Russia's oil-fueled economy has seen its stocks hurtle lower because of falling oil prices and concerns about the depth of the financial and economic woes in Europe and the United States. That combination contributed to the worst-ever day of trading for Russian shares on Monday.