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IMF in global 'meltdown' warning IMF in global 'meltdown' warning
(about 2 hours later)
The world financial system is teetering on the "brink of systemic meltdown", the head of the International Monetary Fund (IMF) has warned in Washington.The world financial system is teetering on the "brink of systemic meltdown", the head of the International Monetary Fund (IMF) has warned in Washington.
Dominique Strauss-Kahn said the crisis was being fanned by fears over debt-ridden banks but added rich nations had so far failed to restore confidence. Dominique Strauss-Kahn said rich nations had so far failed to restore confidence, but he endorsed a new action plan by the G7 group.
He spoke after talks with US President George W Bush, Group of Seven (G7) finance ministers and the World Bank. He also said the IMF was ready to lend to countries in dire need of capital.
Mr Bush said the global economic crisis needed a united international response. Mr Strauss-Kahn spoke after talks with US President George W Bush, G7 finance ministers and the World Bank.
Speaking in the US capital on Saturday, Mr Strauss-Kahn said: "Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown." On Friday in the US capital, the G7 group of most industralised nations released a five-point plan to free up the flow of credit, back efforts by banks to raise money and revive the mortgage market.
Speaking in Washington on Saturday, Mr Strauss-Kahn said: "Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown."
George Bush says the US will lead the response to the crisisGeorge Bush says the US will lead the response to the crisis
The IMF chief was joined at the White House by finance ministers from the G7 most-industrialised nations (the US, Canada, France, Germany, Britain, Italy and Japan), as well as World Bank President Robert Zoellick. He later told a news conference: "The first co-ordination between advanced countries and the rest of the world is now on track."
Following talks with the economic leaders, Mr Bush said: "We must ensure the actions of one country do not contradict or undermine the actions of another. The IMF chief was joined at the White House earlier by finance ministers from the US, Canada, France, Germany, Britain, Italy and Japan, as well as World Bank President Robert Zoellick.
"In an interconnected world, no nation will gain by driving down the fortunes of another. We are in this together. We will come through it together." Following talks with the economic leaders, Mr Bush also pledged co-ordinated action, saying it was serious global crisis which demanded a serious global response.
Panic sellingPanic selling
The meeting came a day after Asian, European and US markets continued to panic sell despite rate cuts and cash injections by central banks, amid widespread fears of a global recession.The meeting came a day after Asian, European and US markets continued to panic sell despite rate cuts and cash injections by central banks, amid widespread fears of a global recession.
Late on Friday, US Treasury Secretary Henry Paulson said the US planned to invest directly in banks for the first since the 1930s, following a similar UK programme of partial bank nationalisation.Late on Friday, US Treasury Secretary Henry Paulson said the US planned to invest directly in banks for the first since the 1930s, following a similar UK programme of partial bank nationalisation.
The G7 had earlier not ruled out adopting another part of the British plan - to guarantee borrowing between banks - as they issued a five-point communique in Washington. The G7 had earlier not ruled out adopting another part of the British plan - to guarantee borrowing between banks - as they issued their plan in Washington.
[We must] redirect the markets so that they serve the people, and not ruin them Angela Merkel German Chancellor Peston: Global fix neededQ&A: Why the big market falls?Timeline: Global credit crunch[We must] redirect the markets so that they serve the people, and not ruin them Angela Merkel German Chancellor Peston: Global fix neededQ&A: Why the big market falls?Timeline: Global credit crunch
The finance ministers also pledged to free up the flow of credit, back efforts by banks to raise money and revive the mortgage market. The G7 also left the door open to further reductions in interest rates, which six central banks this week jointly cut by half a percentage point.
And the G7 left the door open to further reductions in interest rates, which six central banks this week jointly cut by half a percentage point.
But BBC economics correspondent Andrew Walker, in Washington, says there is some disappointment that the G7 plan lacks detail.But BBC economics correspondent Andrew Walker, in Washington, says there is some disappointment that the G7 plan lacks detail.
Meanwhile, French President Nicolas Sarkozy and German Chancellor Angela Merkel said there would be no joint financial rescue fund for Europe, like the US bail-out of Wall Street.Meanwhile, French President Nicolas Sarkozy and German Chancellor Angela Merkel said there would be no joint financial rescue fund for Europe, like the US bail-out of Wall Street.
The two leaders said a common approach to the financial crisis would emerge from a Paris summit on Sunday of 15 eurozone leaders.The two leaders said a common approach to the financial crisis would emerge from a Paris summit on Sunday of 15 eurozone leaders.
UK Prime Minister Gordon Brown will hold talks with Mr Sarkozy in the French capital before the meeting.UK Prime Minister Gordon Brown will hold talks with Mr Sarkozy in the French capital before the meeting.
Chancellor Merkel said governments must "redirect the markets so they serve the people, and not ruin them."Chancellor Merkel said governments must "redirect the markets so they serve the people, and not ruin them."
The heads of the EU's four biggest economies - Britain, France, Germany and Italy - held a first crisis summit last week, but were split over the need for a common plan.The heads of the EU's four biggest economies - Britain, France, Germany and Italy - held a first crisis summit last week, but were split over the need for a common plan.
Analysts say another week of plunging stock markets has focused minds and the real test of this weekend's scramble by world leaders to shore up the international financial system will come once markets reopen again on Monday.Analysts say another week of plunging stock markets has focused minds and the real test of this weekend's scramble by world leaders to shore up the international financial system will come once markets reopen again on Monday.