Washington - The United States and Europe must to more to bring stability to their crumbling financial sectors and clean up banks' balance sheets before the global economy can begin a real recovery, the International Monetary Fund's Managing Director Dominique Strauss-Kahn said Thursday.

"As long as the financial sector will remain frozen, real recovery will not be possible," Strauss-Kahn warned at a press conference in Washington, ahead of a weekend summit of finance ministers from the IMF and its sister lender, the World Bank.

While governments have taken a series of dramatic steps to shore up their banking systems, "we are far from what we need," Strauss- Kahn said.

He warned that banks could not be stabilized until the troubled mortgage assets at the heart of the crisis had been removed from banks' balance sheets, a process that is only just beginning in the United States.

"All the experience we have of past banking crises ... is that you never recover before you completed the cleanup of the balance sheet," Strauss-Kahn said. "You can postpone it (but) at the same time you postpone the recovery."

The IMF on Wednesday predicted the world economy will contract 1.3 per cent in 2009, another sharp revision of its forecasts that signals the worst global recession since World War II. Strauss-Kahn said he still expected a slight recovery in the first half of 2010.

The IMF has also forecast that banks will face 4 trillion dollars in mortgage-related writedowns - 2.8 trillion dollars from US- originated assets - only about one-third of which has already been booked by banks.

The United States has announced a 1-trillion-dollar joint public- private effort to remove the toxic mortgage assets from banks. The results of a series of "stress tests," a probe into financial state of top US banks, could also be released by the US Treasury as soon as Friday. (dpa)