The world financial system is teetering on the "brink of systemic meltdown", the head of the International Monetary Fund (IMF) has warned in Washington, while France and Germany pushed ahead with a pan-European crisis response to try to prevent the worst global downturn in decades.

At a joint news conference, French President Nicolas Sarkozy and German Chancellor Angela Merkel said they had "prepared a certain number of decisions" to present at a Sunday meeting of European leaders as they work feverishly to restore blocked credit markets to working order.

The United States appealed for patience, but the International Monetary Fund stressed that time was running short after leading industrialized nations failed to agree on concrete measures to end the crisis at a meeting on Friday.

French President Nicolas Sarkozy and German Chancellor Angela Merkel said they would present a number of proposals at the summit to ease the credit freeze that has caused the collapse of several leading international banks.

"Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," IMF chief Dominique Strauss-Kahn said.

French Economy Minister Christine Lagarde said the eurozone leaders would discuss the possibility of guaranteeing interbank lending and put "meat" on the "skeleton" of a five-point plan by the G7 group of most industrialised nations to resolve the crisis.

President George W. Bush huddled with Group of Seven economic chiefs and officials from the IMF and World Bank, and said top industrial nations grasped the gravity of the crisis and would work together to solve it.

"I'm confident that the world's major economies can overcome the challenges we face," Bush said, adding that Washington was working as fast as possible to implement a $700 billion financial bailout package approved a week ago.

"The benefits will not be realized overnight, but as these actions take effect, they will help restore stability to our markets and confidence to our financial institutions."

The IMF chief's strong words reflect a belief that the global financial crisis can be contained, Following talks with the economic leaders, Mr Bush also pledged co-ordinated action, saying it was serious global crisis which demanded a serious global response.

The meeting came a day after Asian, European and US markets continued to panic sell despite rate cuts and cash injections by central banks, amid widespread fears of a global recession.

Late on Friday, US Treasury Secretary Henry Paulson said the US planned to invest directly in banks for the first since the 1930s, following a similar UK programme of partial bank nationalisation.

Some Analysts say another week of melting stock markets has re-focused minds and the real test of this weekend's scramble by world leaders to shore up the international financial system will come once markets reopen again on Monday.