Commentary: We must hope governments are ready for one big push

The falls in bank share prices show that urgent, concerted government action is even more necessary. It's now clear that nothing less than a three-pronged response will do. The City wants the Treasury to inject capital into the banks and guarantee all UK deposits and the Bank of England to cut interest rates on Thursday.

What will no longer do is dithering, evidenced by a dripdrip of briefings and leaks about progress or lack of it, from talks with the chief protagonists. Gordon Brown and Alistair Darling must act. Every hour that goes by, confidence is draining away in the banking system and in our faith in the ability of our elected leaders to steer us out of this crisis.

Mere words seeking to reassure will not suffice. The Monetary Policy Committee must move decisively tomorrow. The City is expecting a cut of a quarter to a half of one per cent. If that doesn't take place and the Bank does not give any ground for optimism, the resulting share plunge could eclipse anything we have seen so far. That is the state we're in - where no action is seen as a calamitous loss of belief. Doing nothing is no longer an option.

Lowering rates would provide a boost to UK borrowers, about half of whom hold tracker mortgages and would instantly benefit. The City hopes that the fillip a cut would give to their spending power will be passed on to a battered economy. This is not the moment for the MPC to worry about inflation - lack of growth is the problem now.

But it isn't the Bank of England base rate that has provoked the terrible recent anxiety. Libor, the level at which the banks lend to each other, is far too high. For the banks to start believing in each other and for credit to start flowing again, Libor has to come right down. The Bank of England on its own is not likely to achieve that object. A reduction in base rate would indicate a degree of UK buoyancy but not sufficient to soothe fevered brows in a global maelstrom. A coordinated approach, involving the other central banks, would have the required wider impact.

Again though, it's not the cost of money that is to blame but the mood - banks have to start trusting one another. For that to occur, governments are going to have stand four-square behind their banks. The present mess, where some countries have guaranteed all bank deposits and others have not, is only fuelling the disarray. An across-theboard fight-back, slashing rates, pumping in capital and promising to honour any bank failures, is the only solution.

Of course, that comes at enormous potential cost. But they have no choice: the muchvaunted Paulson US rescue plan has not worked. The best gloss on the absence of firm public announcement must be that frantic efforts are taking place behind the scenes, that ministers and officials here and elsewhere are putting the finishing touches to a gigantic push. If not, the consequences are too grim to contemplate.