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‘World is on the edge of the abyss’

PARIS/LONDON: French Prime Minister Francois Fillon said Friday the world stood on the “edge of the abyss”, gripped by a global financial crisis now threatening industry, trade and jobs worldwide.

Earlier, Europe’s top banker echoed the same mood of alarm sweeping EU capitals when he urged the US Congress to approve a $700 billion plan to tackle the crisis.

Congress’s House of Representatives is expected to vote on the bailout on Friday. But the outcome is far from certain.

Representatives, aware of the unpopularity of the plan to bail out banks whose high risk ventures has brought hardship for the poorest, shocked world markets on Monday by rejecting a previous draft.

Prime Minister Fillon, whose country is hosting an emergency summit of Italian, British and German leaders on Saturday, said only collective action could solve the financial crisis. He said he would not rule out any solution to stop any bank failing.

“The world is on the edge of the abyss because of an irresponsible system,” Fillon said.

European Central Bank President Jean-Claude Trichet sounded an alarm on Friday’s expected vote in the US Congress.

“(US Treasury) Secretary (Henry) Paulson’s plan obviously must be passed,” he told Europe 1 Radio.

“It must be. It is necessary.”

Bad news mounted in the European financial sector.

Worries grew that even if Washington agrees on the package, it will not be enough to resolve deeper-rooted weakness. New data showed that a US recession is nearing and Europe’s economy is worsening.

“Investors expect the US House to approve the bailout, but even if that happens, it would have a neutral impact on the market as its effectiveness is still questionable,” said Takahito Murai, general manager of equities at Nozomi Securities in Tokyo.

Unilateral action: A collapse in the US housing market and resulting “bad mortgages” has undermined confidence in the financial sector, with inter-bank lending and credit to businesses and private individuals all but seizing up. Central Banks have injected billions of dollars to maintain some flow of funds. reuters

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