EU Commissioner for Economy and Monetary Affairs Joaquin Almunia, from Spain, addresses the media at the European Commission headquarters in Brussels, yesterday. The European Commission forecast Monday that the economy in the 15 countries that use the euro will barely grow next year, expanding just 0.1 per cent as the financial crisis hits hard. - Ap

Finance ministers of the European Union on Monday opened two days of talks aimed at crafting proposals for a new global financial order as the gloom in world markets hung over the euro-zone economy's outlook.

As the ministers arrived, forecasts published by the European Commission painted a bleak portrait of the region's future.

They predicted the economy of the 15 countries using the euro was probably already in recession and would expand by just 0.1 per cent in 2009.

The euro-zone's largest members - Germany, France and Italy - will come to a standstill or shrink, it said, warning of a deeper credit crunch that would brake the economy, strain government finances and put a near-freeze on household spending.

Containing the turmoil

With that dire situation to grapple with, ministers were eager to find an agreement on what should be done to reverse - or at least contain - the turmoil that has driven growth down sharply in Europe.

EU officials said European governments were beginning to rally around a consensus to boost the role and powers of the International Monetary Fund to support faltering economies - an issue that will top the agenda of a November 15-16 summit in Washington of G-20 countries, which includes the G-7 industrialised democracies as well as developing powers such as Brazil, India, Russia and China.

The IMF has already dipped into its US$250 billion reserves to provide emergency loans to Iceland, Hungary and Ukraine, totalling US$30 billion.

Pakistan has said it may call on the international body for another US$5 billion.

The finance ministers will debate ways to make global financial markets more transparent and accountable ahead of a meeting of the 27 EU leaders on Friday.

Update of rules

The G-20 Washington summit will debate an update of financial rules created in 1944 at Bretton Woods, New Hampshire, that helped nations cope with economic problems following World War II.

That conference led to the creation of the IMF and World Bank.

The financial crisis and the economic downturn that has followed it have led governments to inject huge sums of money to prop up faltering financial institutions.

The European Commission has proposed to provide €40 billion (US$50 billion) in soft loans to help Europe's ailing car makers create greener vehicles.

France wants EU governments to create state-run investment funds to defend companies against unwanted foreign takeovers or help them financially through a rough spot.

- Ap