Doubts over the effectiveness and costs of drastic new measures in the United States, Britain and Europe to stabilise the global financial system were voiced in Davos at the weekend by leading economic and financial experts.

Leading economists challenged the effectiveness of Gordon Brown's plan to ring-fence distressed loan assets in British banks through a system of government guarantees that may also be adopted by President Obama.

Obama is poised to announce a package this week to clean up US banks that is likely to include creating a “bad bank” to take over and hold the toxic assets clogging the American financial system.

Angela Merkel, the German Chancellor, is working on plans for a rescue based around a bad bank approach in Europe's biggest economy.

The Times