WASHINGTON - THE world's leading powers pledged to band together to tackle the financial crisis at an emergency meeting on Saturday after a warning from the IMF that the global system was on the brink of meltdown.
Following a gathering of rich nations on Friday, leading emerging nations came to Washington for vital G20 talks on the sidelines of the annual meeting of the 185-member International Monetary Fund (IMF).
The G20 grouping of countries which collectively account for 85 per cent of the global economy said they had agreed to use 'all financial and economic tools' to stabilise the system.
These efforts would be 'closely communicated so that the action of one country does not come at the expense of others or the stability of the system as a whole,' said a joint statement.
Attention will now turn to a gathering of European leaders in Paris on Sunday where they are expected to work on a collective action plan to help their ailing banks.
French President Nicolas Sarkozy and German Chancellor Angela Merkel met Saturday in France, stressing their unity the day before the summit where a British-style plan of partial bank nationalization might be unveiled.
French Economy Minister Christine Lagarde promised that observers would 'not be disappointed' by the measures to be adopted.
The head of the IMF, Dominique Strauss-Kahn, claimed a breakthrough with the first global pledge by members of his organisation to cooperate to stabilise turmoil in the financial sector.
He had earlier warned that the financial system risked collapse.
'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,' he said.
Coordination of actions to tackle the financial crisis is considered vital to prevent the actions of one country harming another and exacerbating the problems of bank solvency and credit shortages.
In the last financial crisis of similar proportions, the Great Depression of the 1930s, so-called 'beggar-thy-neighbour' measures taken unilaterally by countries are considered to have deepened the economic pain.
The different groups in Washington - the Group of Seven, the Group of 20 and IMF members - have all supported a five-point action plan to stabilise the financial system.
It is vague on details and contains no timeframe, but commits countries to support systemically important institutions, take measures to get credit flowing, assist banks in raising capital and reassure savers.
The plan also commits them to helping restart frozen markets for mortgage-backed securities, complicated financial instruments that have plummeted in value and have exposed banks to billions of dollars of losses.
It remains to be seen if the reassuring messages will be enough to calm stock markets when they open on Monday after one of the worst week's in history last week.
US President George W. Bush said on Saturday that the world's richest economies in the Group of Seven were united on a 'serious global response' to the financial meltdown.
'We will stand together in addressing this threat to our prosperity. We will do what it takes to resolve this crisis. And the world's economy will emerge stronger as a result,' he said.
Among other announcements on Saturday, the main policy-making body of the IMF said the institution, a lender of last-resort tasked with stabilising the monetary system, stood ready to lend to countries in need of capital.
'Using its emergency procedures, the Fund stands ready to quickly make available substantial resources to help member countries cover financing needs,' the IMF's International Monetary and Financial Committee (IMFC) said.
At the IMF meeting, there was evidence of anger among poorer nations who hold rich nations, particularly the United States, responsible for the crisis that will impact on their economies.
A top Chinese central banker criticised rich nations for the problems in the global financial system, and called on the IMF to improve its monitoring of developed nations which had 'weak financial policy discipline.'
'The major reserve issuing countries should shoulder the responsibility for preventing further spillovers and minimising shocks to other countries,' Mr Yi Gang, deputy governor of the People's Bank of China, told the IMF meeting.
'Who will compensate the innocent countries who are going to ... suffer from this debacle?' asked Kenyan Finance Minister John Michuki. -- AFP