The US financial crisis has gone global, putting the world on the brink of a recession that can only be resolved through international cooperation, International Monetary Fund Managing Director Dominique Strauss-Kahn said Thursday.

In a press conference at IMF headquarters in Washington, Strauss- Kahn warned that a lack of confidence was the most immediate crisis gripping financial markets. He said it had rendered typical government tools - such as lowering interest rates - much less effective.

Strauss-Kahn said the priority has to be the recapitalization of financial institutions, whose balance sheets have been decimated by the drop in value of mortgage assets. He urged advanced economies to coordinate their efforts to help those cash-strapped banks and lenders.

"We are on the cusp of a recession," he said, ahead of the IMF and World Bank's annual meetings set for this weekend. "Cooperation and coordination in action is the price of success."

"No country is immune," from the financial turmoil, Strauss-Kahn warned. Emerging countries are also witnessing slower growth as they struggle with falling demand for exports and their own inability to get loans.

Strauss-Kahn said the IMF was ready to help developing nations, which are also struggling with an ongoing food and fuel crisis, with emergency loans where needed. World Bank President Robert Zoellick indicated it may expand its lending programmes this year as well.

The IMF on Wednesday forecast global growth would fall to 3 per cent in 2009, down from 3.9 per cent this year. A global recession is considered to exist when growth registers under 3 per cent. Advanced economies were projected to grow at close to zero over the course of next year.

"It's fair to say that all of us have underestimated the strength of the financial crisis," Strauss-Kahn said, but did offer one glimmer of hope that a recovery could get underway by mid- to late 2009.

Global markets have been plunging on a daily basis amid fears of more bank failures and a sharp slowdown in economic activity.

Financial ministers and central bank heads arrive in Washington Friday for the IMF and World Bank meetings. The Group of Seven (G7) industrial nations will meet Friday to discuss their next moves to address the crisis.

US Treasury Secretary Henry Paulson on Wednesday would not say if any new measures to tackle the crisis were being considered, either in the G7 meeting or the IMF's committee meeting on Saturday.

Zoellick, in his own press conference, said he hoped the G7 would "point towards coordinated actions to get ahead of the curve" in dealing with the financial instability, which took many by surprise as it ballooned into a full-blown crisis in early September.

Zoellick earlier this week called for the G7 to be expanded to some 14 countries to help developing countries feel a part of the international economy and to deal with a broader range of issues, including food, energy, climate change.

Zoellick also urged developed countries to "keep their eye on some of the poorest countries" - which have less funds to deal with downturns - even as they work through their own debilitating financial crisis.

Strauss-Kahn also called on finance ministers to begin "drawing the lessons" from the current crisis even as they work to resolve it, and to start coming up with new regulation and supervisory measures that could be put in place internationally.