London - Britain and Germany will work together to prevent the spread of the current global financial crisis by seeking a reform of international institutions and encouraging banks to start lending again, Prime Minister Gordon Brown and Chancellor Angela Merkel said in London Thursday.

Both leaders agreed to "strengthen" the Washington-based International Monetary Fund (IMF) with a new facility on which countries threatened by the global crisis - especially the emerging economies - could draw.

It was "vital" that further contagion of countries by the current global financial crisis be prevented, especially in eastern Europe, said Brown in a reference to recent IMF aid packages for Hungary and Ukraine.

Additional resources for the IMF should be provided by countries with "considerable reserves," said Brown. Earlier this week, he said that, in his opinion, China and the oil-rich Gulf states should be called upon to provide extra money for the fund to alleviate the current global financial crisis.

He and Merkel would work together to persuade other nations of the need for "comprehensive global action" to contain the crisis, as all major economies were facing the prospect of recession, Brown said.

"This is a global problem that requires a global solution. No country, no matter how big, can solve these problems on their own," he said.

Merkel stressed that it was important to learn from the current crisis and to limit its impact on the real economy.

"We will not be able to continue our economic success unless action is taken," said the German leader. "Without a functioning world economy, we will not be able to safeguard jobs."

Both Merkel and Brown urged their countries' banks to step up lending, following the massive support packages agreed by major European governments earlier this month.

"This is not yet happening to the extent we had wished for," said Merkel.

Brown urged banks to keep lending to small businesses despite the global credit crunch.

He welcomed a commitment Thursday by the European Investment Bank to make 4 billion pounds (6.4 billion dollars) available to provide financing to firms in Britain.

"We must continue to encourage banks to lend. Having recapitalized the banks we must ensure that the money is used to sustain credit lines on normal terms to solvent businesses," said Brown.

The Brown-Merkel meeting was part of a series of bilateral encounters ahead of next week's European Union (EU) special summit on the financial crisis and a meeting of the Group of 20 in Washington in mid-November. (dpa)