October 13, 2008
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 rich nations had so far failed to restore confidence, but he endorsed a new action plan by the G7 group.
He also said the IMF was ready to lend to countries in dire need of capital.
The 15 eurozone leaders will meet in Paris later to try to establish a common approach to the markets crisis.
French President Nicolas Sarkozy and German Chancellor Angela Merkel said they would present a number of proposals at the summit to ease the credit freeze that has caused the collapse of several leading international banks.
But after meeting in Paris on Saturday, the two leaders said the summit would not result in a joint financial rescue fund for Europe, in the model of a $700bn rescue by the US government.
French Economy Minister Christine Lagarde said the eurozone leaders would discuss the possibility of guaranteeing interbank lending and put “meat” on the “skeleton” of a five-point plan by the G7 group of most industrialised nations to resolve the crisis.
Mr Strauss-Kahn was speaking in Washington after talks with US President George W Bush, G7 finance ministers and the World Bank.
Earlier, G7 ministers had released the five-point plan to free up the flow of credit, back efforts by banks to raise money and revive the mortgage market.
“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,” said Mr Strauss-Kahn.
He later told a news conference: “The first co-ordination between advanced countries and the rest of the world is now on track.”
The IMF chief’s strong words reflect a belief that the global financial crisis can be contained, says the BBC’s economics correspondent Andrew Walker in Washington.
Mr Strauss-Kahn was joined at the White House by finance ministers from the US, Canada, France, Germany, Britain, Italy and Japan, as well as World Bank President Robert Zoellick.
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.