Chancellor George Osborne has called for "decisive co-ordinated action" from governments and central banks around the world to restore health to the global economy.
Mr Osborne was speaking as officials from the European Central Bank held an emergency conference call to discuss moves to stabilise Italy's financial position before markets open today.
Unconfirmed reports suggested that the ECB - including central bankers from the 17 eurozone countries - has agreed to intervene significantly in the markets to shore up the positions of Italy and Spain, probably by buying bonds issued by the administrations in Rome and Madrid.
G7 finance ministers, including Mr Osborne, were this evening expected to confer by phone about the implications of eurozone instability and the downgrading of US credit ratings. The calls marked the end of a frantic weekend of activity as politicians and bankers battled to prevent further carnage on the markets, following the meltdown last week which saw almost £150bn wiped off the FTSE 100 index in London. The financial world is now waiting to see what the markets will do as they start to reopen today.
Mr Osborne said the UK cannot be "immune" to the instability on the continent, but insisted that the Government's austerity programme has made it a "safe haven in the storm".
Eurozone institutions like the ECB must now "do whatever is necessary to ensure financial stability in the euro area", while governments must act swiftly to deliver fiscal consolidation, said the Chancellor.
He cautioned that this can only be "a bridge to a permanent solution".
Mr Osborne also called for swift action in the G20 group of major global economies to correct imbalances between creditor countries like China and the debtor countries of the West, along with structural reforms to boost competitiveness.