IMF chief backs U.S. rescue plan, warns of slowdown

PARIS (Reuters) - IMF Managing Director Dominique Strauss-Kahn has welcomed U.S. steps to shore up its banking system, and warned that the global economy faced a serious, long-lasting slowdown because of the financial crisis.

In an interview with France's Journal du Dimanche newspaper, the head of the International Monetary Fund said the U.S. rescue plan should pave the way for action at an international level to overcome the market turmoil.

"This (U.S.) plan is welcome because it's global. But it has to be the first step of international political action," Strauss-Kahn said in the interview, released ahead of Sunday's publication.

The U.S. Congress is racing to strike a deal on the proposed $700 billion bailout of the financial industry before Asian markets open on Monday.

The IMF chief said the immediate priority was for the United States to approve the plan and "put out the fire," after which the global financial system would need reforming.

He added that the IMF would be ready to assume a leading role in any new regulatory framework if governments wanted, saying there needed to be "a global guarantor."

Strauss-Kahn said the crisis would have a lasting impact on the global economy.

"There is a serious and lasting slowdown of world growth underway. It will be difficult for Europe and sometimes even harder for certain poor countries," he said.

"But the real economy won't sink. Currencies won't topple over. Central banks are succeeding in managing the financial crisis," he was quoted as saying.

And he warned against any moves by European governments to lose grip of their budget deficits during the turbulence.

"To abstain from ones own rules while deciding to regulate the international financial system would be curious," he said. "One cannot keep adding layer of debt on layer of debt."

(Reporting by Crispian Balmer; Editing by Janet Lawrence)