U.K. PM: We're Gonna Need A Bigger Bailout

British Prime Minister Gordon Brown is calling on China and oil-rich Gulf states to offer money for an enhanced IMF bailout fund aimed at helping countries rocked by the global economic downturn.

Brown told reporters on Tuesday that countries with the largest surpluses could "do most to help."

"We must act now, we must set up the fund as quickly as possible," Brown said in London.

The IMF's executive board is expected soon to consider ways to streamline its emergency loan programs as it braces for a stream of petitions from countries seeking support.

Germany's foreign minister said Tuesday that Pakistan must secure a loan from the IMF within a week to avert a looming financial crisis.

High oil prices and dwindling overseas investment have left Pakistan with a yawning balance of payments deficit. The gap is draining its foreign currency reserves and pushing it toward a default on its international debt.

Without help, Pakistan faces the prospect of a run on its currency and defaulting on its international debt, developments that would wreck already shaken confidence in the country.

While Pakistan has already approached the IMF to help solve its balance of payments crisis, it has held out hope that it can raise about $5 billion from other lenders - avoiding an IMF austerity program.

But German Foreign Minister Frank-Walter Steinmeier said after talks with Pakistani officials in Islamabad on Tuesday that Pakistan's problems were so urgent that it had no choice but to seek an IMF loan.

"I can only hope that the decision is taken quickly, because a loan in six months or six weeks will not help, but only if it is approved within the next six days," Steinmeier told reporters. "Then one can perhaps avoid the most difficult situation in Pakistan."

Iceland's prime minister said Tuesday his country needs about $6 billion in loans to recover from the financial meltdown. Iceland's banking system has collapsed in the global credit crunch.

Geir Haarde told The Associated Press that Iceland will need $4 billion in addition to the $2 billion loan package already announced by the IMF.

"It's not a precise number, it's not a scientific number but we are looking in that neighborhood," Haarde said on the sidelines of a meeting with his Nordic colleagues.

Also Tuesday, Iceland's central bank raised its key interest rate by a stunning 6 percentage points to 18 percent. Iceland has seen its currency plunge in recent weeks after its banking sector collapsed in October. An increase in interest rates would make its currency more attractive to foreign investors, thereby helping its value.

The European Commission on Tuesday approved a $623 billion German government rescue plan to stabilize the country's financial institutions.

The EU executive said the plan was "in line" with European rules on what aid EU governments can give to the private sector. The commission has to approve such aid plans to ensure they do not distort competition in the EU's single market.

German lawmakers passed the rescue plan earlier this month.

It was part of a coordinated European bailout effort to calm markets and restore lending between banks and to customers.

Meanwhile, Hungary's currency rose Tuesday on anticipation the government would agree to an emergency standby loan from the IMF. A large interest rate hike last week is also helping.

The euro was worth 266 forints early Tuesday after reaching a peak of 286 forints last week and a low of 229 in July.

The prime minister was to meet later Tuesday with other political parties to discuss an IMF plan. Analysts said the rescue deal could be between $10 billion and $12.5 billion.

Last week, the National Bank of Hungary raised its key interest rate to 11.5 percent from 8.5 percent to make the forint more attractive to investors.

Meanwhile, the U.S. government said Monday that it would start doling out $125 billion to nine major banks this week to get credit flowing again, but Monday's announcement offered cold comfort to investors as rising anxiety about a worldwide recession drove stocks down sharply around the globe.

Assistant Treasury Secretary David Nason said the deals with the nine banks were signed Sunday, and the government will make the stock purchases this week. The deals are designed to bolster the banks' balance sheets so they will begin more normal lending.