President Clinton has stepped up pressure for new measures to tackle the international financial crisis, calling on governments and central bankers to take "immediate, decisive action".
His speech, at a meeting of the IMF, came as speculation intensified about lower international interest rates, helping to spark a recovery on financial markets.
In his strongest speech yet on the global crisis, President Clinton repeatedly called for the US Congress to approve further funding for the IMF and for Japan to reform its financial system and boost its flagging economy.
He underlined his view that the world faces its biggest financial threat in 50 years and that this carries with it a political threat which must be addressed.
The financial crisis "poses a stern test of whether democracies are capable of producing the broad public support necessary for difficult policies that entail sacrifice today for tomorrow's growth", he warned. But both Mr Clinton and the IMF managing director, Mr Michel Camdessus, insisted that a 1930s-style depression is not inevitable. "If we keep a steady nerve, if all countries pursue stability, structural adjustment and orderly liberalisation of their economies, this crisis can be overcome," Mr Camdessus said.
The IMF is believed to be ready to support a financial package to assist Brazil, which has already suffered a destabilising outflow of capital and is now threatened with further market pressures.
European ministers and bankers have emphasised here that the EU economy still continues to grow.
"Europe is one zone where there are still good prospects for economic growth," the Minister for Finance, Mr McCreevy, said yesterday. There are no immediately obvious solutions to the global crisis, he told The Irish Times, emphasising the importance of keeping control on wage growth, so that the economy can remain competitive.
However, the British Chancellor of the Exchequer, Mr Gordon Brown, warned that the British economy could slow down next year because of the crisis.
Internationally, the key first step to addressing the crisis identified by Mr Clinton is approval from Congress for the $18 billion which the US owes the IMF and new measures from Japan to sort out its banking crisis.
Neither move appeared any closer as Mr Clinton spoke yesterday, although the Democratic leader of the House, Mr Richard Gephardt, warned that the "failure of the House Republicans to fully fund the IMF is threatening the stability of the global financial system".
Mr Clinton also insisted that the western world must do its share but did not refer directly to calls for a co-ordinated round of international interest-rate reductions.
However, yesterday an interest rate cut in Spain focused the attention of financial markets on possible further rate reductions worldwide and European share markets rallied strongly on the news.
Spain is one of the countries which must reduce its interest rates to German levels before the introduction of the euro and financial markets are now anticipating rate cuts for the same reason in Italy and Ireland. A reduction by the Central Bank is expected shortly.
Meanwhile pressure for eurozone interest rates to fall even below existing French and German levels next year is growing.
Yesterday, the French prime minister, Mr Lionel Jospin, joined the clamour for lower euro rates to help rescue the world's economy. Last night, speaking to the IMF/ World Bank meeting, his finance minister, Mr Dominique Straus-Kahn, also raised the need for the European Central Bank to consider lowering borrowing costs further. According to Mr Clinton, the G7 countries now believe that the balance of risk in the world's economies has shifted from inflation to a slowdown, hinting that an era of low interest rates has arrived.
"Every nation must take responsibility for growth. We in the US will keep our economy growing and open. But we must, must meet our obligations to the IMF. I have made it clear to Congress that there is no excuse for refusing to supply the fire department with water when the fire is burning," he said.
Mr Clinton also pointed to the need to reform the IMF and World Bank. "We need to do more and the institutions must be updated to deal with 24-hour global markets. And we must find ways to tame the cycles of boom and bust."
But in terms of specific measures, he merely pointed to the negotiations that the US treasury secretary, Mr Robert Rubin has been engaged in on "precautionary lines of credit", which are proposed new funding mechanisms to help states facing an economic crisis.
