World leaders show unity as credit crisis drags on

By Emily Kaiser

WASHINGTON (Reuters) - World finance leaders concluded a whirlwind weekend with a new plan to clean up banks and fresh resolve to rein in foreign exchange markets, but little hope that the credit crisis was nearing an end.

Soaring food prices pushed inflation concerns to the forefront as the World Bank warned of an impending humanitarian crisis that could undo years of poverty-reduction efforts.

The International Monetary Fund predicted a U.S. recession that would exact a hefty toll on global growth, while leaders of the Group of Seven rich nations resorted to tougher talk to try to prop up the ailing U.S. dollar.

With the U.S. economy dangerously close to -- if not already in -- a recession and the deflating dollar spreading economic pain worldwide, usual hot-button issues such as China's growing clout were pushed to the side as the G7, IMF and World Bank held their back-to-back meetings here.

"It's not over yet," U.S. Federal Reserve Vice Chairman Donald Kohn said, summing up the uncertainty surrounding the financial market turmoil that has raged for eight months.

While there was plenty of agreement on what ails the global economy, finding a cure was trickier. The G7 endorsed a report from the Financial Stability Forum that spelled out dozens of reforms needed from global banks and regulators.

Wall Street largely dismissed the proposals as cosmetic changes that would do little to fix the current crisis. Banks have already written off some $225 billion in bad debts tied to failing U.S. subprime mortgages and other loans. The IMF estimated that total losses may near $1 trillion once insurers and others add in their final tally of the damage.

"All the bad news has not come out yet," Italian Economy Minister Tommaso Padoa-Schioppa said.