IMF Says Global Economy Much Worse Than Earlier Estimates

The International Monetary Fund is urging national governments to coordinate efforts aimed at solving the global economic crisis.

A new IMF report says the state of the global financial system has worsened in the last six months from the collapse of mortgage-backed securities and economic problems. It has increased its estimate of losses from the collapse to $1,4 trillion - several hundred billion dollars worse than first estimated.

The report comes as finance officials from around the world struggle to reverse a credit crisis that threatens to stall the global economy. U.S. President George Bush discussed the crisis with leaders of Britain, France, and Italy by phone Tuesday.

In the United States, the central bank is working to restore short-term credit that is crucial to the financial health of many companies. The Federal Reserve announced Tuesday it is making short term loans by purchasing what is called "commercial paper." These short-term loans usually come from pools of investment money, but the price of these loans has been soaring recently.

At the same time, European Union finance ministers are trying to reassure bank depositors by increasing the size of accounts that are protected by insurance against bank failures. EU ministers are also discussing joint responses to the financial crisis.

And Moscow is planning to bolster key Russian banks with up to 36 billion dollars in loans over the next five years.

A rescue plan for U.S. financial institutions was approved on Friday, and President Bush said investors need to give the $700 billion effort time to work.

Global stock markets posted mixed results Tuesday after Monday's major losses.

Major U.S. indexes gained early Tuesday, but were sharply lower in later trading. On Monday, the best-known U.S. stock index, the Dow Jones Industrial Average, closed below the 10,000 mark for the first time in four years.

Tuesday European stock markets were mixed at the close of trading, while a key stock index in Japan finished the day down three percent.