The International Monetary Fund sees a long war in Iraq cutting global economic growth by up to two percentage points from a revised 2003 forecast of 3.3 per cent, Germany's Handelsblatt daily reported on Tuesday.

In a copy of the IMF's World Economic Outlook obtained by the business daily ahead of a presentation in April, the IMF warned of ‘serious economic consequences' from a war in Iraq and lower growth if it went on for a long times and spread to other regions.

The report said a war could spark a global downward spiral if oil prices shoot up, consumer and investor confidence sink and uncertainty in financial markets rises, with the US and euro-zone economies expected to be hit hardest, according to the newspaper.

"In a series of countries, the financial systems would come under pressure if share prices fall further and bad credit were to increase," the paper quoted the IMF as saying.

To deal with the crisis, Handelsblatt said the IMF had recommended speedy interest rate cuts by central banks and called for short-term bridge financing for countries in financial crisis in case of a serious economic slump.

Handelsblatt confirmed a report in Italy's Il Sole 24 Ore business daily last month that the new IMF outlook would cut its growth forecasts for leading economies.

The German daily said the new outlook saw global growth in 2003 of 3.3 per cent, down from 3.7 per cent forecast by the IMF in September. The figure could, however, be revised lower if war breaks out.

The US economy would grow 2.4 per cent in 2003, down from an earlier forecast of 2.6 per cent and Japan would grow 0.5 per cent, down from 1.1 per cent seen in September.

The IMF outlook cut its euro-zone growth forecast to 1.3 per cent from 2.3 per cent and for Germany to 0.7 per cent from 2.0 per cent seen in September, Handelsblatt said, confirming figures published in Il Sole 24 Ore.