By Dipankar De Sarkar, London, October 8, 2008 (IANS)

British Prime Minister Gordon Brown Wednesday announced an unprecedented £500-billion bailout package as central banks around the developed world cut interest rates in a coordinated move aimed at rescuing the global economy from a crippling credit crunch. In a series of steps announced early Wednesday morning, the British government said it was making available an amount of £50 billion to eight banks and building societies to enable them to continue lending to small businesses and individual home-buyers.

The government also made available £200 billion in short-term loans from the Bank of England, and up to £250 billion in loan guarantees at commercial rates to encourage banks to lend to each other.

In what Brown described as a “bold solution", British banks in exchange will have to agree to controls - they will not only continue lending to small businesses and individuals at existing rates but also place limits on huge executive pays and rewarding bankers who take excessive risks. The government said it expected to recoup the money in three years' time.

The steps, aimed at improving the flow of cash in the British economy and described as part-nationalisation of the eight banks and building societies, came as central banks in the US, Britain and across Europe cut interest rates in order to kick-start lending.

The Bank of England cut interest rates by 0.5 percent Wednesday, meeting a day before it was meant to - only the second time it has brought ahead the meeting, the first being in the aftermath of 9/11.

Gordon Bown told a Downing Street news conference: "Extraordinary times call for bold and far-reaching solutions.

"Our stability and restructuring programme is comprehensive, it is specific and it breaks new ground. This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem."

"All these are investments being made by the government, which will earn a proper return for the taxpayer. This support is on commercial terms. We expect to be rewarded for the support we provide," he added.