The International Monetary Fund is pledging a new plan to tackle European debt and deter another recession following a rough week for global markets.
The influential body also warned that the world economy is entering a dangerous new phase that will require bold, co-ordinated action from governments.
The chief concern is that over-leveraged European banks remain vulnerable to a possible Greek debt default, which could create a domino effect and freeze credit globally.
"Today, we agreed to act decisively to tackle the dangers confronting the global economy," said Christine Lagarde, the IMF's managing director.
Lagarde's remarks were similar to those made by Bank of Canada Governor Mark Carney, who also attended two days of meetings in Washington with other G20 financial leaders.
"There's some progress, but I repeat in the end it's about actions. Actions will have to be taken in a timely manner," Carney said.
Despite sound fundamentals, he warned that Canada isn't immune to the potential dangers of global tremors.
"In the absence of effective resolution (in Europe) one could expect a deterioration of financial conditions globally that would have spillover effects on major economies, including Canada," he said.
The IMF's policy-setting group, which is in favour of bailing out Greece, Portugal and Ireland, said it's encouraging that the Euro's 17 members are willing to act in concert.
But it warned that cautious monitoring and a willingness to act quickly are still essential.
The latest pledge from the IMF comes after Canadian Finance Minister Jim Flaherty urged European countries to take immediate steps to "overwhelm" their growing debt crisis.
"This problem in Europe needs to be overwhelmed as the Americans overwhelmed their problem," Flaherty said on Friday, referring to the almost trillion-dollar bailout of U.S. banks in 2008.
While a clearly frustrated Flaherty pushed his European counterparts to implement a massive bailout, their response was somewhat guarded, since not all of the 17 member nations have agreed on the terms.
Later on Saturday, Flaherty told CTV News Channel, "I'm satisfied the Europeans understand the important of going ahead and fulfilling their commitments."
Test for new IMF chief
The European debt issue is considered an important first test for Lagarde, who was ushered into the position of IMF chief following her predecessor's departure.
Former IMF head Dominique Strauss-Kahn, who was instrumental to the IMF's policies during the 2008 financial meltdown, was forced out of the job in June due to a sex scandal in New York.
So far, there have been reports that holders of Greek debt may have to deal with larger losses as part of a plan to offer the country more help.
But Lagarde refused to comment on the reported plan, and instead reiterated a previous commitment that would see some European nations make tough cuts so others can extend aid.
"It's implementation first and foremost," she said. "No qualification."
Policy makers in Washington are also sounding the alarm, with U.S. Treasury Secretary Timothy Geithner saying bluntly that time is running out.
He said that if Europe doesn't deal with the problem soon, a domino-style run of defaults could occur throughout the continent and globally.
"The threat of cascading default, bank runs and catastrophic risk must be taken off the table," Geithner said in a meeting with the IMF's policy committee.
"Decisions as to how to conclusively address the region's problems cannot wait until the crisis gets even more severe."
Markets take a plunge
The G20 meeting came at the close of a wild week for stock markets, oil prices and gold futures.
In Toronto, the stock market index lost 7.5 per cent during the week, falling almost 100 points on Friday alone. The index has dropped 20 per cent since March.
In New York, the stock market rose 37 points on Friday after losing more than 700 points the previous two days.
Growing fears of a recession knocked almost 10 per cent off oil and gold prices this week and the Canadian dollar continued its slide, down 0.19 of a cent to 97.14 cents U.S.
Gold slipped to $1,639.80 an ounce, just weeks after hitting a record of $1,876.
This week, the IMF described Canada as one of the few large economies that would be able to stimulate economic growth through higher spending.
With files from The Canadian Press
