IMF: Europe must act like U.S. on credit crisis

PARIS, France (CNN) -- Europe must show it can respond like the United States in the "trial by fire" of the global financial crisis, says International Monetary Fund head Dominique Strauss-Kahn.

French President Nicolas Sarkozy has denied he wants a European version of the U.S. banking bailout.

European leaders are meeting in Paris on Saturday to discuss their approach to the global financial crisis.

Strauss-Kahn said that the financial situation was an unprecedented test for the countries that use Europe's common currency, The Associated Press reported.

The IMF boss said the crisis was worrying and that his organization would lower its economic growth forecasts.

Strauus-Khan commented after meeting Saturday with French President Nicolas Sarkozy to discuss Europe's response.

Sarkozy also planned to meet with British Prime Minister Gordon Brown, German Chancellor Angela Merkel and Italian Prime Minister Silvio Berlusconi.

Also expected to attend was Luxembourg Prime Minister Jean-Claude Juncker who heads the Eurogroup, comprising the finance ministers of the 15 countries using the euro.

European Commission President Jose Manuel Barroso and European Central Bank President Jean Claude Trichet were also expected at the summit.

Sarkozy said the economic crisis required a global response, while Brown said that no strong bank should be allowed to fail for lack of solvency.

He also mooted setting up a $21 billion European fund to help small businesses through the economic downturn.

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Europe has been hit with bankruptcies and stock declines since the crisis unfolded in the United States last month.

Europe has welcomed the approval in the U.S. Congress of a $700 billion financial industry bailout. However, most of the leaders at the summit are against a similar Europe-wide bailout.

Sarkozy has denied France was backing the creation of a special fund to rescue any crisis-hit European banks despite the French finance minister floating the idea.

The European Central Bank left its key interest rate unchanged Thursday, but it and the Bank of England are under increasing pressure to cut rates quickly in the face of declining economic activity and an increase in unemployment.


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