IMF warns that markets could collapse by another 20%

The world is on the brink of financial meltdown, the head of the International Monetary Fund (IMF) said last night. His bleak warning came as finance ministers tried to calm the frenzy in markets that saw share prices crash by more than 20% last week.

World Markets Plummets

Worldwide panic sparks sell-off

A man looks at a video display showing financial data in downtown Tokyo October 10, 2008. The Nikkei average tumbled 11 percent on Friday, leaving it facing its biggest one-day drop since the 1987 stock market crash on fears the financial crisis will lead to a global recession.(Yuriko Nakao/Reuters)

European stock markets slumped in early trading Friday following massive sell-offs on Wall Street and Asia as lending rates between banks continue to rise despite this week's efforts by central banks to break the logjam in credit markets.

Icelandic Prime Minister Geir Haarde warns nation of bankruptcy

A man walks out of a branch of Landsbanki in Reykjavik, Iceland Tuesday Oct. 7, 2008 . Iceland nationalized its second-largest bank Landsbanki on Tuesday under day-old legislation and negotiated a euro4 billion (US$5.4 billion) loan from Russia to shore up the nation's finances amid a full-blown financial crisis. The moves came a day after trading in shares of major banks was suspended, the Icelandic krona lost a quarter of its value against the euro, and the government rushed through emergency legislation giving it new powers to deal with the financial meltdown. Prime Minister Haarde warned late Monday that the heavy exposure of the tiny country's banking sector to the global financial turmoil raised the spectre of 'national bankruptcy.

'This volcanic island near the Arctic Circle is on the brink of becoming the first "national bankruptcy" of the global financial meltdown. "Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

Japanese Nikkei plunges nearly 10%

A trader works on the trading floor of Daiwa Securities SMBC Co. in Tokyo, October 7, 2008. (Yuriko Nakao/Reuters)

Panic over the fast-spreading financial crisis dragged down markets across Asia, with Japanese steelmakers such as Nippon Steel Corp (5401.T) sliding, as the Nikkei set another five-year closing low. It has lost 19 percent in the past five days.