The International Monetary Fund has said that the world's financial system is near meltdown.
The warning came hours before European leaders began a meeting in the French capital to tackle the deepening financial crisis.
"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," Dominique Strauss-Kahn, the IMF chief, said on Sunday.
Spreading crisis
Strauss-Kahn expressed hope that government actions would prove powerful enough to persuade banks to resume lending and bring an end to a spreading credit crunch.
"In the coming days ... what I expect is that the reaction by the different institutions will be positive enough to unfreeze the different markets and to restore the necessary funding," he said.
Later on Sunday, Nicolas Sarkozy, the French president, welcomed European leaders to the summit in Paris, saying he expected "an ambitious, co-ordinated plan" to contain the financial crisis.
Representatives from 15 countries in the Euro-zone will be hearing from Gordon Brown, the British prime minister.
He is expected to urge them to adopt a programme similar to that in the UK - in which governments take out large stakes in their country's banks.
Al Jazeera's Mark Seddon, speaking from Paris, said: "It seems possible that European leaders are likely to agree to guarantee inter-bank lending and [do] this by issuing government securities.
"Giving the confidence to banks to begin that lending process all over again is the major demand heard this week as the markets have tumbled."
Bank rescue
Meanwhile, The Sunday Times newspaper in London said Britain would launch its biggest retail bank rescue on Monday when the four largest banks - HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays - ask for a combined $60.5bn lifeline.
The unprecedented move would make the government the biggest shareholder in at least two banks, HBOS and Royal Bank of Scotland, the newspaper said on its website. It did not give a named source for its information.
IN DEPTH
No government officials or representatives from the four banks were immediately available to comment on the report.
Australia also announced that it would guarantee all bank deposits for three years and guarantee wholesale funding to Australian banks in an attempt to combat the credit crisis.
Australia would also make $2.6bn available for mortgage-backed securities to help maintain liquidity for non-bank lenders, Kevin Rudd, the prime minister, told reporters.
Amid the financial turmoil, markets in the Middle East continued to spiral downward on Sunday, the first day of the business week for most countries in the region.
The IMF said it backed a plan by the G7 most industrialised nations to try to stabilise markets and urged "exceptional vigilance, co-ordination and readiness to take bold action" to contain a firestorm that pushed global stocks to five-year lows on Friday.
Beyond talk
Christine Lagarde, France's economy minister, said that the gathering would go beyond talking about remedies to "put meat, muscles on the bones of that skeleton and to develop, follow up and execute upon it".
The US appealed for patience but the IMF said time was short after the G7 nations - which include the US, Britain, France, Germany, Italy, Japan and Canada - failed to agree on concrete measures to end the crisis at a meeting on Friday.
George Bush, the US president, met 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," he said.
The warning came hours before European leaders began a meeting in the French capital to tackle the deepening financial crisis.
"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," Dominique Strauss-Kahn, the IMF chief, said on Sunday.
Spreading crisis
Strauss-Kahn expressed hope that government actions would prove powerful enough to persuade banks to resume lending and bring an end to a spreading credit crunch.
"In the coming days ... what I expect is that the reaction by the different institutions will be positive enough to unfreeze the different markets and to restore the necessary funding," he said.
Later on Sunday, Nicolas Sarkozy, the French president, welcomed European leaders to the summit in Paris, saying he expected "an ambitious, co-ordinated plan" to contain the financial crisis.
Representatives from 15 countries in the Euro-zone will be hearing from Gordon Brown, the British prime minister.
He is expected to urge them to adopt a programme similar to that in the UK - in which governments take out large stakes in their country's banks.
Al Jazeera's Mark Seddon, speaking from Paris, said: "It seems possible that European leaders are likely to agree to guarantee inter-bank lending and [do] this by issuing government securities.
"Giving the confidence to banks to begin that lending process all over again is the major demand heard this week as the markets have tumbled."
Bank rescue
Meanwhile, The Sunday Times newspaper in London said Britain would launch its biggest retail bank rescue on Monday when the four largest banks - HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays - ask for a combined $60.5bn lifeline.
The unprecedented move would make the government the biggest shareholder in at least two banks, HBOS and Royal Bank of Scotland, the newspaper said on its website. It did not give a named source for its information.
IN DEPTH
No government officials or representatives from the four banks were immediately available to comment on the report.
Australia also announced that it would guarantee all bank deposits for three years and guarantee wholesale funding to Australian banks in an attempt to combat the credit crisis.
Australia would also make $2.6bn available for mortgage-backed securities to help maintain liquidity for non-bank lenders, Kevin Rudd, the prime minister, told reporters.
Amid the financial turmoil, markets in the Middle East continued to spiral downward on Sunday, the first day of the business week for most countries in the region.
The IMF said it backed a plan by the G7 most industrialised nations to try to stabilise markets and urged "exceptional vigilance, co-ordination and readiness to take bold action" to contain a firestorm that pushed global stocks to five-year lows on Friday.
Beyond talk
Christine Lagarde, France's economy minister, said that the gathering would go beyond talking about remedies to "put meat, muscles on the bones of that skeleton and to develop, follow up and execute upon it".
The US appealed for patience but the IMF said time was short after the G7 nations - which include the US, Britain, France, Germany, Italy, Japan and Canada - failed to agree on concrete measures to end the crisis at a meeting on Friday.
George Bush, the US president, met 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," he said.
