World leaders screwed up the pressure on Europe to take decisive action to contain its debt crisis as markets spun out of control over fears of a breakdown of the euro zone.
But even as stalling growth in the advanced economies was having an impact across the world, European officials stiffly rebuffed pressure to allow for some growth-boosting fiscal measures.
The heads of the International Monetary Fund and the World Bank, leaders of the United States, Britain and other major economies, and developing country officials all called on Europe's chiefs to take action quickly to contain Greece's festering debt emergency and to shore up the region's banks.
World Bank president Robert Zoellick pressed all the advanced economies for action.
"Europe, Japan, and the United States must act to address their big economic problems before they become bigger problems for the rest of the world," he said at a news conference opening the World Bank and IMF annual meetings in Washington.
"Not to do so is irresponsible."
IMF managing director Christine Lagarde said debt burdens and capital-weak banks "could actually suffocate the recovery" in the world economy and spark more crises in the poorest countries.
An aide to US President Barack Obama said Obama had pressed European counterparts for "forceful and decisive" action in talks at the United Nations this week.
Leaders of Australia, Britain, Canada, Indonesia, Mexico and South Korea added their voices in a joint letter to the Group of 20 developed and developing economies, which meets in Washington on Friday.
"Euro zone governments and institutions must act swiftly to resolve the euro crisis and all European economies must confront the debt overhang to prevent contagion to the wider global economy," they said.
Emerging economies push
And finance ministers and central bankers from the BRICS emerging economies - Brazil, Russia, India, China and South Africa - made their own push at the World Bank-IMF meetings.
"European countries need to be quick, bold and cooperative with each other; that's what we recommend," Brazilian Finance Minister Guido Mantega said after a BRICS meeting.
"It is in the EU where there are major problems. European countries are delaying finding solutions," he said.
The warnings came amid a huge selloff in financial and commodity markets, sparked both by Europe's problems and perceptions that the US economy is falling back toward recession.
A day-long global stocks rout ended with a 3.5 per cent loss on the Dow Jones Industrial Average, and oil prices sank, with New York's main contract plunging 6.3 per cent.
Although some of the statements mentioned the US and Japan, there was little nuance to mask the focus on Europe, ahead of Friday's meeting in Washington of finance chiefs of the G20, the world's most powerful economies.
The warnings also came on a day of more tensions in Greece, the epicenter of Europe's problems. Strikes swept across the country over new budget cuts by the government, under deep pressure from the EU and the IMF, with Athens hoping it will get more money disbursed from their 110 billion euro rescue program.
Fiscal shortfalls
If Greece does not meet their conditions for austerity - or the conditions are not eased - Athens could default on its debt as early as next month, many believe, and send shockwaves throughout the euro zone.
The gist of the warnings was that Europe's leaders needed to accept more room for fiscal shortfalls in its most indebted countries, because spending cuts were cutting off growth, only to worsen the fiscal problems.
"Consolidating too fast, too heavy for some countries, is going to be harmful for potential growth," Lagarde said.
"Some countries can accommodate growth in the short term."
US Treasury Secretary Timothy Geithner said Thursday that governments should "recognize growth is the major challenge we face around the world" and adjust their economic policies to the "new reality."
Lagarde also called for quicker EU movement to boost the capital reserves of the euro zone banks, many of which are saddled with risky debt from the region's worst-off countries Greece, Portugal, and Ireland.
But European finance officials at the World Bank-IMF meetings dismissed the growth calls.
European Commissioner for Economic and Monetary Affairs Olli Rehn said that slower growth "is no excuse to stop putting our fiscal houses in order. That is necessary to restore confidence."
"In some countries there is simply no room for maneuver," he said.
Rehn meanwhile cautioned patience while European countries reviewed a plan to allow the EFSF emergency stabilization fund to be used to extend support directly to banks.
French Finance Minister Francois Baroin said Europe was not going to change the policies it had in place.
"The main issue is the reduction of deficits everywhere in Europe," he said.
"We are convinced that the only thing to do in Europe is to take budget consolidation measures."
AFP