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Britain's Chancellor of the Exchequer George Osborne listens to a speech by Mervyn King, the Governor of the Bank of England at the Mansion House Banquet in the City of London June 14, 2012Paul Hackett/Reuters

Anxious governments and central banks are bracing for the crucial weekend election in Greece that could unleash new storms across debt-ravaged Europe.

Britain moved aggressively Thursday to flood its financial system with cash and safeguard its weakened economy. Other governments and central banks are on alert to act to prevent major fallout in financial markets.

The jostling highlights the severity of the situation in the troubled euro zone, and worries that the Greek vote could lead to the exit of Athens from the 17-member monetary union, driving up already steep borrowing costs for far bigger Spain and Italy and putting the future of the single currency at risk. Europe's debt crisis has sparked turmoil in global markets for two years, but the election in Greece could mark a new phase should the anti-austerity forces, which say they want to remain within the euro but under less harsh conditions, prevail.

The British measures include injecting £5-billion ($7.9-billion) or more a month into the financial system and enabling banks to swap assets with the Bank of England in exchange for cheap long-term funding so they can lend more money to businesses and households.

British officials, faced with deteriorating economic and financial conditions, decided they could no longer remain on the sidelines.

"These are very difficult economic times – as difficult perhaps as any our country or our continent has faced outside of war," Chancellor of the Exchequer George Osborne told financial leaders in his annual Mansion House speech in London Thursday evening, where he and Bank of England Governor Mervyn King unveiled their new defensive strategy.

"We are not powerless in the face of the euro zone debt storm," Mr. Osborne said. "Together we can deploy new firepower to defend our economy from the crisis on our doorstep."

That firepower will not include any fiscal stimulus, despite growing criticism that the government's austerity drive has deepened the economic malaise and made the country more vulnerable to the ill winds blowing from Europe. But there will be considerably more pump-priming by the central bank.

The Bank of England will lend money to commercial banks at below market rates, provided the banks increase their own lending. And the central bank will activate a facility set up last December to pump at least £5-billion a month into the banking system in exchange for a wide variety of collateral. The measure is designed to shore up banks during periods of extreme stress.

The government calculates that a 5-per-cent rise in bank lending would translate into an infusion of about £80-billion into the economy.

The central bank could also resume its quantitative easing program – buying British government bonds – which it stopped in May at the £325-billion mark, the policy makers indicated.

The euro zone's woes have eroded confidence in Britain, causing tighter credit conditions and reducing spending by worried businesses and consumers, Sir Mervyn told the black-tie audience.

"The black cloud has dampened animal spirits so that businesses and households are battening down the hatches to prepare for the storms ahead."

Central bankers and finance ministers elsewhere are making their own preparations, just in case the European crisis goes from bad to worse. Reports that they will co-ordinate responses to stabilize markets and keep credit flowing buoyed investors.

"The central banks are preparing for co-ordinated action to provide liquidity," a senior G20 aide familiar with discussions among financial officials told Reuters. His comment was confirmed by several other Group of 20 officials.

Finance ministers from the developed countries could hold an emergency meeting during the G20 gathering in Los Cabos, Mexico, early next week to cobble together a joint response if the markets are badly mauled in the wake of the Greek vote.

The Bank of Canada has warned that a "further significant deterioration in global financial conditions could have a considerable impact in Canada through trade, financial and confidence channels."