IMF sees financial crisis ending

Mr Strauss-Kahn sees light at the end of the tunnel

The head of the International Monetary Fund (IMF) says the worst of the global financial turmoil is over.

But Dominique Strauss-Kahn, the IMF's managing director, warned the effects of the turmoil on the broader economy would be felt for some time.

He added that a recovery in the US depended on house prices picking up.

Last month, the IMF said the world economy would grow much more slowly in the next two years as a result of the credit crunch.

US housing gloom

Mr Strauss-Kahn told a European Parliament committee in Brussels: "There are good reasons to believe the worst news is behind us."

But he indicated that much depended on a recovery in the US property market.

"In the US, the housing crisis is still there. When you look at prices in the US, they're still going down, there's not a single sign of stabilisation," he added.

In April, the IMF gave a gloomy forecast for the global economy as a result of the credit crunch. It said world economic growth would slow to 3.7% in 2008 and 2009, 1.25% lower than growth in 2007.

The IMF forecasts that the US economy will grow by just 0.5% during 2008 and will suffer a mild recession in the first half of the year.

However, there are hopes that many of the world's biggest banks and financial institutions are drawing a line under credit crunch losses and have now disclosed the full extent of their exposure to the US sub-prime mortgage market and other high-risk loans.