The worsening global economic crisis calls for a firm and aggressive action from world economic giants if an acute financial turmoil is to be avoided, the International Monetary Fund (IMF) has warned.

The alarm from the IMF follows Monday’s poor performance of the global financial market. The IMF says the deepening market crisis could spiral downhill and force economies into recession.

In its twice-a –year Global Financial Stability Report, the IMF says: “The risk of a more severe adverse feedback loop between the financial system and the broader economy represents a critical threat.”

The report also warned that the losses arising from the economic downturn faced by US and global banks will continue to deepen, inflicting “enormous strains” on various institutions and the financial system.

At the same time corporate loans, consumer loans and the value of US mortgages will burgeon further as America’s housing market decline worsens and the economy sinking even deeper into recession it concluded.

“While the US housing sector may finally trough at some point in 2009, continued declines in house prices and sluggish growth are likely to deepen and broaden the default cycle,” it said.

The IMF says that Britain’s huge debt burden affecting many households will result in similar financial problems facing America.