IMF's Strauss-Kahn says crisis still far from over

By Lesley Wroughton

WASHINGTON (Reuters) - IMF Managing Director Dominique Strauss-Kahn said on Thursday the global economic crisis still had "long months" to go before it was finished.

"Despite some red lights and green lights ... our belief is the crisis is far from over," Strauss-Kahn told a press conference on the eve of a regular spring meeting of the International Monetary Fund.

There are "still long months of economic distress in front of us," he said, despite some evidence of economic stability due to the impact of powerful stimulus measures undertaken by authorities. But he reiterated the IMF's forecast that the world economy would recover in the first half of next year.

"The good news is we still believe the recovery can take place in the first semester of 2010," Strauss-Kahn said.

However, he stressed this meant banks must cleanse their balance sheets of bad loans, accumulated during the U.S. housing bubble, that undermined confidence and froze credit.

"You never recover before you complete the cleaning up of the balance sheet of the financial sector," he said.

"Already a lot has been done, but not enough, not enough in old advanced economies," he said.

The United States will release stress tests of its top 19 banks on May 4 to shed light on their capital positions, and examine how they would fare in an even more severe U.S. recession. The step is a deliberate bid to restore confidence in the sector, which officials say must restart generalized lending in order to restore wider economic growth.