FRANKFURT, Germany — The central banks of the wealthiest countries, trying to prevent a debt crisis in Europe from exploding into a global panic, swept in Wednesday to shore up the world financial system by making it easier for banks to borrow American dollars.
Stock markets around the world roared their approval. The Dow Jones industrial average rose more than 490 points, or 4.24 percent, its best day in 2½ years. Stocks climbed 5 percent in Germany and more than 4 percent in France.
The action appeared to be the most extraordinary coordinated effort by the central banks since they cut interest rates together in October 2008, at the depths of the financial crisis.
But while it should ease borrowing for banks, it does little to solve the underlying problem of mountains of government debt in Europe, leaving markets still waiting for a permanent fix. European leaders gather next week for a summit on the debt crisis.
The European Central Bank, which has been reluctant to intervene to stop the growing crisis on its own continent, was joined in the decision by the Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland.
“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the central banks said in a joint statement.
China, which has the largest economy in the world after the European Union and the United States, reduced the amount of money its banks are required to hold in reserve, another attempt to free up cash for lending.
The display of worldwide coordination was meant to restore confidence in the global financial system and to demonstrate that central banks will do what they can to prevent a repeat of 2008.
That fall, fear gripped the financial system after the collapse of Lehman Brothers, a storied American investment house. Banks around the world severely restricted lending to each other. Investors panicked, resulting in a meltdown in stocks.
In October 2008, the ECB, the Fed and other central banks cut interest rates together. That action, like Wednesday’s, was a signal from the central banks to the financial markets that they would be players, not spectators.
This year, investors have been nervously watching Europe to see whether they should take the same approach and dump stocks. World stock markets have been unusually volatile since summer.
The European crisis, which six months ago seemed focused on the relatively small economy of Greece, now threatens the existence of the euro, the common currency used by 17 countries in Europe.
There have also been signs, particularly in Europe, that it is becoming more difficult to borrow money, especially as U.S. money market funds lend less money to banks in the euro nations because of perceived risk from the debt crisis.
European banks cut business loans by 16 percent in the third quarter. And no one knows how much European banks will lose on their massive holdings of bonds of heavily indebted countries. Until the damage is clear, banks are reluctant to lend.
Banks are also being pressed by European governments to increase their buffers against possible losses. That helps stabilize the banking system but reduces the amount of money available to lend to businesses.
“European banks are having trouble borrowing in general, including in dollars,” said Joseph Gagnon, a former Fed official and a senior fellow at the Peterson Institute for International Economics. “The Fed did the Europeans a favor.”
Foreign central banks are reducing by half a percentage point, to about 0.6 percent, the rate they charge commercial banks for dollar loans. Commercial banks need dollars because they are the No. 1 currency for international trade. The lower rate is designed to get credit flowing again.
To get the dollars to lend, central banks go to the Fed and exchange their currency for dollars under a special swap program. Foreign central banks pay the Fed whatever interest they earned from commercial banks.
The Fed had offered dollar swaps from December 2007, when world financial markets were weakening because of fear about subprime mortgages, until February 2010. It reopened the program in May 2010, as European debt concerns grew, and planned to end it Aug. 1, 2012. On Wednesday, the Fed extended the program to Feb. 1, 2013.
If it all works, the market rates on dollar loans will drop, and stock and bond markets will calm down.
“It shows that policymakers are on the case,” said Roberto Perli, managing director at the International Strategy & Investment Group, an investment firm. He said it has symbolic value even if it does not have a big impact on credit markets.
The decision to cut the interest charged on the dollar swaps was taken by the Federal Reserve following a videoconference held by Fed officials on Monday morning. The Fed’s policy-setting panel approved it 9-1. The president of the Fed’s regional bank in Richmond, Va., voted no.
In New York, the stock market jumped at the opening bell and added to its gains throughout the day. It finished up 490.05 points, its seventh-largest one-day gain and its best since March 23, 2009, two weeks after the stock market’s post-meltdown low.
Wednesday’s advance also swung the Dow from a loss for the year to a gain. It closed at 12,045.68, its first close above 12,000 since Nov. 15.
Stocks closed 5 percent higher in Germany, 4.2 percent in France and 3.2 percent in Britain. European stocks had posted big gains earlier this week because investors saw hope that countries would settle on an attempted fix for the European debt crisis.
Stock markets in Asia, which closed before the central banks announced their move, finished lower for the day. The statement came out at 8 a.m., in the middle of the European trading day, an hour and a half before the market opened in New York.