IMF: World on brink of financial collapse

The global financial system is on the brink of a systemic meltdown despite interventions by the US and Europe to stabilize markets, the head of the International Monetary Fund says. Even with unprecedented actions in major economies, including coordinated central bank rate cuts, IMF Managing Director Dominique Strauss-Kahn today said those measures had so far failed to calm the situation. "The measures have not yet achieved the goal of stabilizing markets and bolstering confidence," Strauss-Kahn told the IMF's policy-steering committee, the International Monetary and Financial Committee. "Thus, additional moves will likely be needed in the coming months." He said the financial crisis had deepened and was now affecting many more parts of the global financial system, including emerging markets, which until now had been shielded from the crisis. Strauss-Kahn said conditions were likely to remain very difficult, restraining global growth prospects, while credit conditions are set to get tougher and constrain the ability of banks and companies to access funding. The IMF has already warned the world economy will slow sharply next year and the recovery will be unusually slow, with Europe and the United States either in or close to a recession. The immediate challenge for financial policy-makers is to regain order in the system, while also nursing economies through the downturn and keeping inflation under control. Doing this, he said, would require "comprehensive responses that address the systemic problems," including dealing with toxic bank assets, recapitalizing banks and adding capital to funding markets.