Equities surge shows cooperation works: Boutros-Ghali

WASHINGTON (Reuters) - A rally in world stockmarkets on Monday showed that weekend collaboration among the world's economies to limit the impact of the financial crisis succeeded, Egypt's Finance Minister and head of the IMF's policy-steering committee said on Monday.

Stocks surged and the Dow Jones Industrial Average had its biggest point gain ever on Monday, rising more than 900 points, after weekend measures by European countries and the Group of Seven major economies to rescue a distressed financial system.

In a communique on Saturday, the IMF's policy-steering committee, representing the fund's 185 member countries, threw their support behind the G7 plan in a broader effort to bolster market confidence.

"Monday morning markets was seen as the test of the effect of our actions," Egypt's Finance Minister Youssef Boutros-Ghali, who chairs the policy-steering International Monetary and Financial Committee (IMFC).

"I had no doubt that markets would move up, but the only thing that worried me is that the proceedings of the IMFC would not have enough exposure so people would know what we did," he said in an interview.

The urgency of dealing with the crisis distracted from Boutros-Ghali's recent appointment as IMFC chair and the first time that an emerging country has headed the committee after years of European dominance.

Boutros-Ghali said there was no discussion during the IMFC meeting on Saturday about any particular country's rescue plan, but there was unanimity that the G7 package had to be supported to calm panic in global markets.

"We got a feeling in the room that we should stick by each other, support each other," Boutros-Ghali said of the meeting of finance leaders. "It's a global problem and we needed a global solution."

He said particular care was taken in the IMFC's communique not to confuse the message that all countries were behind the G7 plan.

"We took care that there would be no room for misinterpretation, so that there would not even be the possibility of misinterpretation," he added.

Boutros-Ghali said rescue package by countries need not be identical because not all problems are the same, but it was critical that governments cooperate more.

He said while cooperation among countries was improved during the three-day IMF meetings, it needed refining.

"The process may not be quite in place, it needs to be more tightly organized," Boutros-Ghali added.

IMF WATCHDOG ROLE

He said it was also important that the IMF stepped up to its role as watchdog of the global financial system and should do a better job of overseeing country's economies.

"Putting the fund back in center-stage is the paramount target we should be aiming at," said Boutros-Ghali. "It is the best equipped institution to coordinate and its the best equipped to be a clearing house of information," he added.

But Boutros-Ghali said to do its job properly, the IMF also had to realize that times had changed.

"The rules of the game have changed and we need to change the procedures, we need to change what we watch, and we need to change what we react," he added.

"The problems used to come from balance of payments crises but this is a financial crisis," he said. "There was never such a collapse engineered by the financial sector before," said Boutros-Ghali, who worked at the IMF during the Mexico peso crisis.

On Egypt's economy, Boutros-Ghali said the financial impact would be limited but it would probably not escape the broader economic impacts of the crisis.

"There will be a real economy fallout, but how much of it depends on what we do.

"If we manage to compensate the reduced foreign investment flows into the Egyptian economy by increased foreign investment flows from the Middle East region, which exist, then we can weather it better," he said.

"If we manage to sustain domestic demand better than we have so far, because it has taken a hit because of increased prices of food and fuel, then we can manage to keep growth rates up," he added.

Boutros-Ghali said business sentiment in Egypt was "not that bad but not that good either".

In 2008, Egyptian economic growth may be able to "get north of 6.0 percent" but next year is less certain. The government had expected 7.0 percent growth in 2008.

(Reporting by Lesley Wroughton.)