SOS call from IMF over crunch

Posted 2008-04-6

The International Monetary Fund (IMF) has issued its harshest warning yet over the potential fallout of the global credit crunch.

IMF chief Dominique Strauss-Kahn told the Financial Times that the need for public intervention was "becoming more evident" if governments wished to successfully weather the downturn.

Aside from pumping liquidity into the markets, the head of the global body said authorities appeared to have done little to intervene in financial systems - offering assistance only in the extreme case of Northern Rock.

Furthermore, Mr Strauss-Kahn expressed his disappointment that the securities and housing sector has received scant support.

Justin Urquhart Stewart of Seven Investment Management backed up the assessment, arguing that more co-ordinated and effective work between governments was necessary to ensure the buoyancy of the markets.

"Weve gone from the idea of the banks just providing access to extra cash, to intervening on odd occasions, then to the final line when were actually saying were going to have to stand behind this and formally intervene overall in the market to support it," he told the BBC.

"Rather than just waiting for individual banks to go wrong the weaker banks will need further help and its going to be more than just access to liquidity."

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