New data released showed the Japanese economy, the world's second largest, shrank for a third straight quarter in the three months to December.

It was the weakest performance since 1974 when the country was reeling from the first oil crisis, and the government said this slump would be even worse.

"This is the worst-ever crisis in the post-war era. There is no doubt about it," Japanese Economic and Fiscal Policy Minister Kaoru Yosano said.

The news came after a weekend meeting of the Group of Seven -- Britain, Canada, France, Germany, Italy, Japan and the United States -- which urged bold reforms to the world financial system and painted a bleak picture of the economy.

The G7 finance officials "appear to fully recognize the gravity of the current situation, and they have said the right things about the actions that need to be taken," said Bill Witherell, economist at Cumberland Advisors.

But he added that "the good words need to be matched by deeds, by prompt and effective action."

Chinese President Hu Jintao warned the crisis was deepening and India's acting finance minister Pranab Mukherjee said "extraordinary economic circumstances" meant India had to ramp up its budget spending.

"The impact of the crisis on economies around the world is still deepening and its grave consequences will be felt more in the days to come," Hu said in the Tanzanian capital Dar es Salaam during a tour of Africa.

Meanwhile the government in India, which like China is considered a global growth leader, abandoned its traditional fiscal caution and approved a sharp increase in budget spending in a bid to beat the crisis.

"Extraordinary economic circumstances merit extraordinary measures," Mukherjee told a session of parliament.

"Employment generation schemes have to be expanded and social security nets have to be strengthened to protect the vulnerable sections of our society."

In Europe, Ukraine suffered a fresh blow on Monday when international ratings agency Standard and Poor's warned of a possible credit rating downgrade as the ex-Soviet republic struggled to get International Monetary Fund credit.

And Russia disclosed that its industrial production plunged by 16.0 percent in January compared with January 2008. Russian officials have already warned that the economy will record a contraction in 2009.

There was more fallout from the crisis in Japan where hundreds of laid-off temporary workers protested and in Britain where German automaker BMW said it would shed 850 workers at a plant in England who help make the Mini car.

BMW said nearly a fifth of workers at its plant in Cowley, near London, would be affected by the downsizing starting on March 2 to coincide with a reduction in the working week to five days from seven.

"While Mini has been weathering the economic downturn, it is not immune from the challenges of the current situation," BMW said in a statement.

A trade union official said Dutch truckmaker DAF will slash its workforce in half at its Westerlo factory in northern Belgium, cutting 873 jobs.

In the United States, where financial markets were closed for a public holiday, President Barack Obama was preparing to sign a new massive economic stimulus plan on Tuesday.

Obama has said his 787-billion-dollar stimulus package, combining public works spending and tax cuts, is the only alternative to catastrophe.

Analysts also expected the US administration to announce a new plan to ease home foreclosures and to offer further details about a bank rescue plan announced last week.

An administration official said Obama is to set up a task force to steer the restructuring of the crippled US auto industry instead of relying on just one "car czar."

As two giant automakers prepare to unveil painful recovery plans to the government on Tuesday, the official said the task force would be headed by Treasury Secretary Timothy Geithner and White House economic advisor Lawrence Summers.

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