European leaders seek bank plan as IMF warns of meltdown

World powers vowed to keep a united front to solve the financial crisis as the IMF warned that the global system was on the brink of meltdown ahead of new European crisis talks in Paris on Sunday. Leaders of the 15 eurozone countries plus Britain are gathering in the French capital to announce a new package of measures to protect their banks from the global financial crisis. The European meeting comes a day after leading emerging nations met in Washington for vital Group of 20 (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 percent 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. 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 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 that have met since Friday 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 institutions underpinning the international financial system, to take measures to get credit flowing, to assist banks in raising capital and to 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 Monday after one of the worst weeks in economic history last week. US President George W. Bush said 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 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. In Paris, European leaders are expected to work on a collective action plan to help their ailing banks. French President Nicolas Sarkozy, the current head of the European Union, was to host first Britain's Prime Minister Gordon Brown and then his 14 colleagues from the single-currency bloc in the Elysee Palace. Sarkozy already met German Chancellor Angela Merkel on Saturday in France, stressing their unity the day before the summit where a British-style plan of partial bank nationalisation might be unveiled. French Economy Minister Christine Lagarde promised that observers would "not be disappointed" by the measures to be adopted. No details have yet been released about the proposals, but there were signs that the 15 were leaning towards a policy already adopted in Britain under which the state guarantees inter-bank lending and buys stakes in banks. London hopes this voluntary part-nationalisation, which has been accepted by some of its biggest institutions, will unfreeze capital and restore confidence. Britain is not part of the eurozone, but Sarkozy said he wanted to meet Brown to "maximise coordination." Sarkozy and Merkel promised that Europe's response would be closely coordinated. "Germany and France have perfectly identical views on the consequences to take from that for the short, medium and long term," Sarkozy said. Merkel agreed Paris and Berlin were "on the same path as regards putting in place a concerted and coherent reaction for the eurozone" but stressed that within this there was "naturally room for manoeuvre for each member state". "We are aware that state interventions are necessary because uncontrolled markets are not able to surmount these problems," she added.