IMF warns of meltdown

By Lesley Wroughton and Francois Murphy

WASHINGTON/ COLOMBEY-LES-DEUX-EGLISES, France (Reuters) - The IMF warned on Saturday the world's financial system was on the brink of meltdown as France and Germany promised a European crisis response to try to prevent the worst global downturn in decades.

The International Monetary Fund said it backed a Group of Seven plan to try to stabilize markets and urged "exceptional vigilance, coordination and readiness to take bold action" to contain the firestorm sweeping through markets.

French President Nicolas Sarkozy and German Chancellor Angela Merkel, meeting in France, 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 IMF said time was short after industrialized nations failed to agree on concrete measures to end the crisis at a meeting on Friday.

"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.

Strauss-Kahn later expressed confidence that government action will prove powerful enough to "unfreeze" markets in coming days.

U.S. President George W. Bush met with G7 economic chiefs and officials from the IMF and World Bank and said top industrial nations would work together to solve the crisis.

"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.  Continued...