WASHINGTON (AFP) - Group of Seven finance chiefs have unveiled a five-point plan to fight the global economic firestorm and restore confidence in the financial system by shoring up struggling banks.

"The G7 agrees today that the current situation calls for urgent and exceptional action," the US Treasury said in a statement on behalf of the G7 nations on Firday.

"We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth," it added after the finance ministers and central bank chiefs from the G7 nations -- the United States, Germany, Japan, France, Britain, Italy and Canada -- met in Washington.

Treasury Secretary Henry Paulson said it was an "aggressive" plan to "address the turmoil in global financial markets and the stresses on our financial institutions."

Washington would start moving "as soon as we can" to inject capital into troubled banks, he told journalists. "We're going to do it as soon as we can do it and do it effectively."

And he added: "We are in close coordination and communication with Japan and China and other investors around the world."

Under the G7 plan, the economic powers would seek to ensure that banks "can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses."

The seven nations also committed to taking decisive measures to stop further bank collapses and unfreeze credit lines to pump more liquidity into the market.

The move came after global stock markets went into a freefall Friday as panicked investors found no place to hide, even though Wall Street managed to stem the losses in a stomach-churning session of ups and downs.

Some markets plunged 10 percent in the worst performance since the 1987 stock crash as part of a global meltdown that began with Tokyo's 9.6 percent nosedive.

"If you could measure the overall confidence level of investors, it would likely be so low that it would frighten the rest of the longs out of the market," said Kevin Giddis at Morgan Keegan.

"This is the scary part of the movie where the slasher is hiding in the shadows around the corner waiting to pounce."

On Wall Street, the Dow Jones Industrial Average saw early losses of as much as 700 points, and two sudden spurts into positive territory before closing down 128.00 points (1.49 percent) at 8,451.19.

The market saw a stomach-turning session at the end of a vicious week of selling that sent the Dow and S&P indexes tumbling 18 percent.

US President George W. Bush, who is due to meet Saturday with the G7 ministers at the White House, insisted the raging firestorm would be put out.

As stock exchanges from Tokyo to London to New York were sucked deeper into the turmoil, Bush blamed "uncertainty and fear" for much of the global financial meltdown.

"Anxiety can feed anxiety and that can make it hard to see all that is being done" to address the problem, he said in a White House statement. "We can solve this crisis, and we will."

London's FTSE 100 index skirted close to a 10-percent loss before a slight pullback. The Paris CAC 40 dived 10.57 percent and there were similar losses in Frankfurt.

Japan's Nikkei-225 index closed down 9.62 percent, Hong Kong lost 7.2 percent and Singapore 7.34. Tokyo briefly halted some trading in futures and options as the Nikkei saw its biggest fall since the crash of October 1987.

A fresh injection of 45.5 billion dollars into Japanese money markets failed to stop the collapse as the crisis claimed its first Japanese victim, with Yamato Life Insurance filing for bankruptcy protection.

Nowhere was immune from the rout. South America's largest stock market in Sao Paulo was suspended after the market slid more than 10 percent. Trading in Moscow was also halted.

And in Mexico, the central bank had to pump some 6.4 billion dollars into the market to help the plummeting peso which reached record lows.

European heads of state and government meanwhile agreed to hold a financial crisis summit in Paris on Sunday to "define a joint action plan for the eurozone and the European Central Bank," the French presidency said.

Despite repeated pledges to coordinate their action, EU governments have often gone their own ways so far in tackling the crisis at the national level.

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