Well, the bazookas have duly been fired. Talk about a Big Bang. There were two huge ones, in quick succession yesterday. First, the details of the government�s bailout plan for British banks were finally revealed.

Well, the bazookas have duly been fired. Talk about a Big Bang. There were two huge ones, in quick succession yesterday. First, the details of the government's bailout plan for British banks were finally revealed. A package with a minimum price-tag of £500bn - yes £500bn - to help rebuild battered bank balance sheets, increase and extend liquidity and put a government guarantee behind banks' attempts to refinance maturing loans in the gummed-up wholesale money markets.

That guarantee, accounting for half the total package, will have a dramatic impact on the most vulnerable banks before they even get round to negotiating how much new capital they want from the public purse, and on what terms. Hence HBOS's share price recovery yesterday, up by nearly a quarter on the day.

But arguably the bigger bang was the co-ordinated emergency base rate cut of 0.5% by central banks in North America, across Europe and here in the UK. Unlike the Darling recapitalisation plan, which was preceded by leaks and spin and party posturing, including a surprisingly well-timed column by the Tory leader David Cameron in Monday's FT, this central bank action hit the markets cold. So why such a churlish response?

The FTSE-100 ended yesterday down another 5.2%. Other European markets were down even more. Bank stocks were mixed, so this was not another bloodbath triggered by investor fears over bank solvency or their existing shareholders being diluted by the British taxpayer. Markets are now spooked by expectations of a protracted global slowdown, a threat spelled out in some alarming numbers by the IMF's latest World Economic Outlook.

The IMF now expects global growth, which was 5% last year, to slow to just 3% in 2009. Much of the pain will be felt in the developed world. The IMF now predicts growth of just 0.1% in the United States next year and 0.2% in the eurozone. The UK economy, it thinks, will contract by 0.1%. Virtual standstill all round.

Both Italy and Spain will fare marginally worse than that. But spare a thought for Ireland (GDP shrinking 1.8% this year and 0.6% next year) and Iceland, expected to contract 3.1% in 2009, even before its banks disintegrated into messy receivership in the course of this week.

Against that backdrop, you can see why equity markets might shrug off co-ordinated central bank intervention on rates as they plumb deeper depths. Confidence is already in tatters thanks to the banking bust. A protracted global slowdown just about puts the tin hat on it.

The Bank of England half-point cut was the first in seven years. It is unlikely to be the last before 2009 is out. With world commodity prices, including oil, continuing to fall as output contracts, the inflation threat is receding. And now that Mervyn King and his colleagues on the Monetary Policy Committee (MPC) have got the message, there could be a lot more to come.

At the tail-end of the last global financial crisis, in late 1998, our MPC cut rates five months in a row, three of them 0.5% reductions. In all, between October 1998 and June 1999, UK rates fell by a total of 2.5%. And this crisis, as far as the west is concerned, makes that one look like a minor snuffle.

So the interest rate story still has some considerable way to run, I suspect. And if western economies can emerge no more seriously damaged than the IMF now envisages, there is still room for optimism.

The traumas of recent weeks do not, as some observers have been suggesting, vindicate the claim in the chancellor's infamous Guardian heart-to-heart in August that our economy is facing a 60-year low.

It is nowhere near that. And even the kind of 2009 slowdown forecast by the IMF may prove no worse than the last UK recession of the early 1990s. We are, I readily admit, facing a banking crisis much bigger than anything we've encountered since the Second World War. But if yesterday's bailout plan helps unblock the financial plumbing, we can still contain most of the damage within that sector.

It's a big if. The government's package is certainly bold. But until some of the operational detail has been clarified, we can't be certain it will have the desired effect. We are told the first eight "eligible institutions" - seven banks and one building society - are committed to increasing their combined Tier 1 capital by £25bn.

But they don't operate a combined balance sheet. Is there a benchmark percentage for such capital that all must agree to reach, whether by selling preference shares to the government or seeking fresh injections in the marketplace?

What about the ones that are already insisting they have more than enough capital? Does that make them ineligible? It matters.For the £250bn of guarantees on interbank lending that the government intends committing over the next three years is, we are told, only available to eligible institutions.

Or could it be that the big rescue tent has been erected to shade from view those banks that really need the state's money but don't want to be seen rattling the collecting tin in the full glare of publicity?