IMF warns of financial meltdown
WASHINGTON: Oct.11, 2008. The IMF warned on Saturday that the global financial system was on the brink of meltdown, while France and Germany pushed
ahead with a pan-European crisis response to try to prevent the worst global downturn in decades. At a joint news conference, French President Nicolas
Sarkozy and German Chancellor Angela Merkel said they had "prepared a certain number of decisions" to present at a Sunday meeting of European leaders as
they work feverishly to restore blocked credit markets to working order.The United States appealed for patience, but the International Monetary Fund stressed
that time was running short after leading industrialized nations failed to agree on concrete measures to end the crisis at a meeting on Friday.
Egypt's Finance Minister and International Monetary and Financial Committee
(IMFC) Chairman Youssef Bourtos-Ghali (2nd R), International Monetary Fund
(IMF) Managing Director Dominique Strauss-Kahn (C), IMF's First Deputy
Managing Director John Lipsky (2nd L) and IMF Secretary Shailendra Anjaria (R)
attend the meeting of the IMFC at IMF Headquarters in Washington October 11,
2008
"Intensifying solvency concerns about a number of the largest U.S.-based and
European financial institutions have pushed the global financial system to the brink
of systemic meltdown," IMF chief Dominique Strauss-Kahn said.

President George W. Bush huddled with Group of Seven economic chiefs and
officials from the IMF and World Bank, and said top industrial nations grasped the
gravity of the crisis and would work together to solve it.

"I'm confident that the world's major economies can overcome the challenges we
face," Bush said, adding that Washington was working as fast as possible to
implement a $700 billion financial bailout package approved a week ago.

"The benefits will not be realized overnight, but as these actions take effect, they will
help restore stability to our markets and confidence to our financial institutions."

Confidence has been in short supply and panic has swept through global markets,
driving stocks to a five-year low on Friday and prompting banks to hoard cash. That
has choked off lending to businesses and households, threatening to turn a global
economic slowdown into a dangerously deep recession.

U.S. Treasury Secretary Henry Paulson said risks to the global economy were "the
most serious and challenging in recent memory."



EUROPEAN UNITY

 An emergency meeting of euro zone leaders on Sunday will discuss a bank rescue package, taking a British initiative to guarantee lending between banks as a
reference point, a source close to the French presidency said.

France's Sarkozy said euro zone countries were working on a joint solution, but declined to provide specifics. He planned to meet with British Prime Minister
Gordon Brown shortly before Sunday's euro zone gathering.

Britain's rescue plan, launched last week, makes available 50 billion pounds ($86 billion) of taxpayers' money for injection into its banks and, crucially, calls for
underwriting interbank lending, which has all but frozen around the globe.

Germany was also considering injecting capital into its banks, Merkel said on Saturday.

The world's rich nations vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks can raise money but they offered no specifics
on a collective course of action to avert the recession threat.

In a surprisingly brief statement after a 3-1/2 hour meeting, the G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- stopped short of
backing the British interbank lending guarantee, something many on Wall Street saw as vital to end growing market panic.

Kenneth Rogoff, a Harvard University professor and former IMF chief economist, said the G7 would have been better served adopting some version of the
British plan so that banks would feel confident enough to loosen their grip on lending.

"Saying that they'll take all steps necessary leaves hanging the question of whether they know what is best and necessary," he told Reuters. "It was a signature
moment for the G7. I think markets are going to be very disappointed."

European Central Bank President Jean-Claude Trichet said markets needed time to digest a series of dramatic steps taken by world central banks in recent
days, including pouring billions of dollars into financial markets and lowering interest rates in the broadest coordinated cut on record.

 WORKING AROUND THE CLOCK

 U.S. Treasury's Paulson said it was "naive" to think that the G7 would endorse a one-size-fits-all approach to ending the credit crisis because there were major
differences between the countries and their financial systems.

He said the Bush administration was scrambling to put together a plan to buy direct stakes in American banks to shore up balance sheets riddled with heavy
credit losses from the 14-month crisis that began with failing U.S. mortgage loans.

"We're going to do it as we can do it in a proper way that will be effective. Trust me, we're not wasting time, we're working around the clock," Paulson said late on
Friday after the G7 meeting broke up.

But even as Paulson and his fellow finance ministers insisted that they were working as fast as possible, there were signs the economy was credit-starved and
deteriorating fast.

The U.S. auto sector has been particularly hard-hit. General Motors has had talks with smaller rival Chrysler LLC about a merger that would combine the No. 1
and No. 3 American automakers at a time when both are struggling to cut costs and shore up cash, according to a source briefed on the matter.

Financial weekly Barron's reported that GM was preparing to approach the U.S. Federal Reserve about borrowing money directly from the central bank because
the logjam in credit markets had shut it out of other kinds of borrowing.


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