Countries must keep their promises to coordinate measures to revive the global economy rather than pleasing voters with protectionist policies, the International Monetary Fund said.
Governments have employed a mixture of measures - from stimulus packages to bank bail-outs - to try to ease the deepening recession, but some have been criticized for putting national interests before trade commitments.
The US $787 billion stimulus package, due to be signed by President Barack Obama later on Tuesday, has been criticized for its “Buy American” clause that says firms must use US steel and other US-made goods. French and Italian auto bail-outs have also been criticized by European policymakers.
“What shocks me, you see, what bothers me a bit is that in the international arena ... everyone agrees that we need to work and act together,” IMF chief Dominique Strauss-Kahn told France Inter radio.
“Then when everyone goes home, everyone has his national constraints, everyone does things a bit differently and sometimes with a little contradiction, and it is for this reason that there are some risks.”
Earlier, US Secretary of State Hillary Clinton called for a coordinated response after meeting Japanese Foreign Minister Hirofumi Nakasone, saying: “As the first- and second-largest economies in the world, we understand those responsibilities.”
The United States has hoped a $17.4 billion bailout would help its auto industry, which some US companies have argued employs as many as one in 10 US jobs.
But General Motors Corp and Chrysler have been asked to submit survival plans to justify the loans, and are due to present the measures to cut costs later on Tuesday.
In Europe, German premium carmaker Daimler was the latest to suffer, posting a fourth-quarter loss before interest and tax of €1.95 billion ($2.47 billion).
The European banking sector, hit by bad loans from a mortgage collapse in the United States and across the West, could also face further losses, a ratings agency said.
Moody's said Western European banks had bought most of their eastern European counterparts, now facing higher provisions for bad debt, the rise in banks' borrowing costs and falling currencies.
Ukraine has begun its slide into a deep recession with industrial output shrinking by over a third - the worst drop in over a decade.
Concerns over banks' balance sheets sent European shares to a two-week low US shares were due to open lower.
German Chancellor Angela Merkel again said that banks should not be absolved from their responsibilities and the state should not take on bad assets.
It should allow financial institutions to hold on to good ones, she said, announcing that the government was trying to take a controlling stake in lender Hypo Real Estate.
With government measures so far failing to stem the downturn, some policymakers have started discussing alternatives.
Russia will cut spending on the 2014 Winter Olympics by 15%, news agencies quoted a deputy prime minister as saying.
European Central Bank governing council member Ewald Nowotny said Europe had some room to cut interest rates but “basically I am not an advocate of nominal zero interest rates, which would mean negative real interest rates.”
“There is, as we are going down with interest rates, the discussion on whether there are additional, more unconventional measures. This is a discussion that is going on in the ECB and we have to see how things develop,” he said in an interview with the Financial Times. In Asia, Japan has suffered a sharper contraction than other major economies because of its heavy dependence on exports combined with persistently soft domestic demand.
The Reuters Tankan monthly poll provided more evidence that confidence among Japanese manufacturers was at near record lows and service-sector hit an all-time low.
Japanese Prime Minister Taro Aso named 70-year-old Economics Minister Kaoru Yosano as finance minister after Shoichi Nakagawa resigned. Nakagawa was forced to deny he was drunk at a G7 news conference in Rome.
“With Nakagawa quitting, the government lacks a person in charge to come up with further steps to support an economy that is worsening sharply,” said NLI Research Institute chief economist Koichi Haji. (Reuters)