Leading international analysts sounded ominous warnings at Davos yesterday over fundamental imbalances in the global economy and looming risks of a financial and economic crisis.

Economist Fred Bergsten, head of America's Institute of International Economics, said that the United States risked provoking a currency crisis if US budget plans did not bolster markets' confidence that Washington was serious about reducing its fiscal deficit - blamed in part for the slide in the dollar.

Mr Bergsten said a financial crisis could be triggered within a week.

"We face an enormous risk of a major dollar crisis," said Mr Bergsten. "The world would undoubtedly fall into a much slower growth pattern."

Mr Bergsten's stark analysis came as the White House estimated on Tuesday that the US budget deficit for 2005, including an extra $80 billion for Iraq and Afghanistan operations, will total $427 billion - 3.5 per cent of GDP.

Meanwhile, Stephen Roach, the famously bearish chief economist at Morgan Stanley, said that "self-indulgent" US consumers are the "weakest-link" in a global economy that could falter at any moment.

In another gloomy assessment of global economic prospects for 2005, Mr Roach told a meeting of the World Economic Forum that rampant US consumption had been the main driver of the spectacular rates of growth the global economy achieved in 2004.

However, with economies all around the world increasingly reliant on exporting their goods to the US, a moderation in US spending could have serious repercussions for the global economy.

"For me, something just doesn't add up. The self indulgent American consumer ... is an accident waiting to happen," said Mr Roach, a long-time pessimistic on the US economy.

Rather than using the fruits of the increased economic activity, US consumers are funding their massive spending spree through borrowing against the inflated values of their homes, he said

"We are in the early stages of a residential property price bubble in the US. Consumers know this and that is why they are turning their homes into a massive ATM machine," explained Mr Roach.

US consumers "suck money" out of their properties to fuel imports from Asia. In turn Asian countries buy US dollars, keeping interest rates low and allowing US householders to borrow even more, according to Mr Roach.

"This is an utterly insane way to run the world economy. You know that, we know that, but the Federal Reserve is in denial about that," he said.

With US rates rising from the 'unconscionably' levels of recent years, there will inevitably be a fall back in US property price inflation and hence consumer spending, he added.

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