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The intensifying credit crunch is so severe that lower interest rates alone will not be enough "to get out of the turmoil we are in", the managing director of the International Monetary Fund warned at the weekend.

In a dramatic volte face for an international body that only in the autumn called for "continued fiscal consolidation" in the US, Dominique Strauss-Kahn, the new IMF head, gave a green light for the proposed US fiscal stimulus package and called for other countries to follow suit.

"I don't think we would get rid of the crisis with just monetary tools," he said at the World Economic Forum in Davos, Switzerland, adding "a new fiscal policy is probably today an accurate way to answer the crisis"...