The world's biggest central banks sprang into action to help shield the eurozone and the entire global system from the debt crisis on Wednesday with extra funds for banks.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the US Federal Reserve and the Swiss National Bank collectively announced at 2:00 pm (1300 GMT) "liquidity support to the global financial system."

Stocks and the euro each surged in the minutes after the decision's announcement, which represents a massive bid to prevent a global depression and serious social conflict 10 days before an EU summit meeting.

Many banks are being squeezed by the weight of downgraded government debt bonds in their books, raising pressure on them to reduce lending, particularly on foreign markets. This is a pivotal route for contagion of the eurozone debt crisis to the global economy.

The central banks, which can create their own money, said that they would ensure funds were available, explaining that the "purpose" was to "mitigate the effects of such strains on the supply of credit to households and businesses."

New long-term cash-flow in all of their respective currencies will be available from December 5 to February 1, 2013, they said, with short-term funding now also available "until further notice."

The moves echo similar action in the early hours of May 10, 2010, when the EU first acknowledged that the Greek drama had become a wider euro crisis causing deep concern among international partners from the United States to Japan.

The massive injection came after the EU highlighted a 10-day window, through to an extended summit in Brussels next week, in which to fix a festering global financial crisis amid fresh warnings that a return to conflict in Europe can no longer be dismissed.

Amid record eurozone unemployment, it was timed to coincide with Wall Street's opening in New York.

It was "undoubtedly a response to the growing euro-crisis and the dark shadow it is casting over the world economy," economist Sony Kapoor of the Re-Define consultancy said, saying it would provide "a useful cushion against Lehmann-like panic in the financial markets," he said referring to the collapse of an American bank that triggered the 2008 financial crisis.

The money does not leave unanswered difficult questions for the eurozone, which has struggled badly to assemble a financial war-chest sufficient to halt investor flight.

As the EU's euro crisis commissioner Olli Rehn said, the bloc faces "a critical period of 10 days to complete and conclude the crisis response," with EU government ministers ramping up pressure on the ECB and the International Monetary Fund to act.

But the central banks' action provided a massive breather after a top source already told AFP that the IMF would now bail out Italy -- if the ECB joined the effort.

"If Italy needed help, the IMF would be ready to do it, it is a possibility that is not excluded," AFP's well-placed source underlined.

Italy, with a debt mountain of nearly two trillion euros, has faced intense pressure on bond markets, also affecting Spain and France.

New Italian premier Mario Monti -- in Brussels in his other role as finance minister -- maintained the EU has no room for error at next week's summit, after being ordered to fill a missing "buffer" zone in his national accounts.

France's foreign minister Alain Juppe had earlier echoed recent warnings from Poland of conflict -- social as much as military -- again blighting the continent.

"It's an existential crisis for Europe," Juppe told French news weekly L'Express, adding that the collapse of monetary union would trigger "the explosion of the European Union itself."

He added: "In that eventuality, everything becomes possible, even the worst. We have flattered ourselves for decades that we have eradicated the danger of conflict inside our continent, but let's not be too sure."

The obstacle to radical ECB intervention -- and more is wanted by the politicians in coordination with the IMF -- has been Europe's biggest economy and political paymaster Germany.

The big problem with the IMF is that its lending capacity, while cast in iron, is scarely more more than the 440-billion-euro headline depth of the European Financial Stability Facility (EFSF), which has failed so far to lure Chinese and other emerging money to back its ideas.

The G20 gathering China, India and Russia alongside traditional growth engines, is debating a boost to IMF resources, but that argument won't be over within Rehn's timescale.

For starters, the United States is wrestling with what to do about runaway historic debts of its own.

Source: The Daily Star/ Bangladesh/ 1st  Dec 2011