WASHINGTON - THE International Monetary Fund meets this weekend as the 'major downturn' it predicted only days ago for the global economy turns into a savage rout of markets and a test for governments to find a way out.

'The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s,' the IMF warned on Wednesday in its World Economic Outlook (WEO) report.

By Friday, that forecast looked exactly right as Wall Street opened with another unnerving plunge of 700 points after very heavy losses across Europe and in Asia as investors dumped stock to get cash at all costs.

'The crisis is now self-reinforcing and shows no signs of abating,' said Mr Chris Lafakis at Economy.com, echoing widely held concerns that measures taken so far to restore confidence have failed to do the job.

Unprecedented joint action by the US, European and several major central banks earlier in the week to cut interest rates also failed to stem the tide more than briefly.

On Friday, the finance chiefs of the Group of Seven industrialised nations meet in Washington under pressure to map out a joint plan of action to tackle a crisis that is rapidly escalating.

The British finance minister, Alistair Darling, said in Washington on Friday that all governments must act together if they are to tackle the crisis effectively, with the G7 and IMF meetings key to forming a united front.

'I think the key is to ensure that governments all over the world act together, firstly to stabilise the banking system ... (and to) do whatever it takes to maintain stability,' Mr Darling told National Public Radio.

IMF head Dominique Strauss-Kahn also pressed the message, urgently calling for 'cooperative' action to boost confidence.

'The world must act quickly, forcefully and cooperatively to contain the ongoing financial and economic downturn,' Mr Strauss-Kahn said on Friday.

Mr Strauss-Kahn earlier in the week blamed a failure of supervision and regulation which the IMF could help correct and he reactivated an emergency lifeline used to rescue ailing economies in the 1997 Asian financial meltdown.

'The major advanced economies are already in or close to recession and, although a recovery is projected to take hold progressively in 2009, the pickup is likely to be unusually gradual, held back by continued financial market deleveraging,' the 185-nation IMF said in the WEO report.

'The immediate policy challenge is to stabilise financial conditions, while nursing economies through a period of slow activity and keeping inflation under control,' it said as it downgraded global growth forecasts for this year and next.

While the financial crisis will inevitably dominate the meeting, Mr Strauss-Kahn said members should not forget the 'other crisis' of soaring food and energy prices he had highlighted at the IMF April meeting.

'Food prices, if they go on like they are doing today ... the consequences will be terrible,' he said at the time, pointing to the risk of widespread starvation and social unrest.

'A long period with high inflation is a long period of rising inequalities and a long period with possible unrest,' he warned again on Thursday, calling on rich donor countries to make good on their pledges of aid for the poor. -- AFP