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CAIRO (Thomson Financial) - Dominique Strauss-Kahn, the head of the International Monetary Fund, said on Tuesday the current international credit crisis was "unprecedented" but cautioned against panic.

"We are facing an unprecedented financial crisis" because it stems from "the heart of the system," the United States, and not from its "periphery" and has affected the whole world simultaneously, he told AFP in French.

"Some parts of the world are more or less affected, but the slowdown is general," he said, adding that "the entire global economy will slow down by between a half and two percent" of growth, including in China and Europe.

"Something new is more dangerous than something that happens repeatedly, but a difference with (the financial crisis of) 1929 is that we have instruments which don't allow us to avoid the crisis but to soften the consequences and correct their effects," in particular the IMF, he said.

He spoke amid fears of a domino effect in the global financial system after troubled investment giant Lehman Brothers sought bankruptcy protection.

"The fact that a certain number of banks in the United States are restructuring shouldn't lead to panic," said the IMF chief.

"But, these events add to the uncertainty, and financial tensions cannot be excluded in the short term," with banks other than Lehman Brothers also in a bad position, he said.

Global equities tumbled for a second day running on Tuesday as anxious investors waited to see if US insurance giant AIG would suffer the same fate as Lehman Brothers.

Strauss-Khan pointed to some positive developments, including the oil price which has dropped below 100 dollars a barrel and said the IMF would predict an economic upturn in 2009 in its next forecast in October.

He was in Egypt for talks with officials, including President Hosni Mubarak, on the country's economic reform programme.

tf.TFN-Europe_newsdesk@thomson.com

afp/ra

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