Berlin - A fragile calm appears to have descended on global financial markets after several waves of turmoil driven by fears that the US economic convulsions, triggered by the nation's mortgage industry meltdown, could span out around the world economy.

But the risk of further market upheavals remains high. The new first-quarter corporate reporting season is under way and economists warned it would take some time for the tremors from the first major financial crisis of the 21st century to work their way through the global economy.

"The worse news might not emerge until 2009," Kenneth Wattret, BNP Paribas' chief eurozone economist, told Deutsche Presse-Agentur dpa. Surging oil prices are prompting worries about renewed inflationary pressures at a time when economic growth is sliding.

Indeed, the global economy has entered an uncertain period with the credit crunch and the US mortgage market crisis undercutting the world's economic growth prospects for the year ahead.

The US mortgage market upheaval and plunging house prices have not only badly shaken economic confidence in the US and rattled consumers in the world's biggest economy, they also led to the property bubble bursting in parts of Europe while at the same time raising the prospects of a shakeout in Asia's key export markets.

"One lesson that I thought policy-makers had learned from the 1997 crisis was that there was a need to protect their economies from external shocks," said James McCormack, managing director for Asia-Pacific Fitch Rating, a country and corporate risk-rating agency.

"But economies across the (Asian) region actually rely now more on external demand than they did before the 1997 crisis, so if that was one of the lessons, it wasn't learned," McCormack said.

Set against the backdrop of the US presidential election campaign, the troubled US economy has also helped to stoke a debate about what has gone wrong with the international financial system, and what can be done to fix it.

More to the point, it has set off a push for a more rigorous regulatory market environment, a major shift in economic policy thinking away from a market cures-all approach towards increased supervisory action that could lead to closer monitoring of the world's financial sector.

"People just forgot to think about risk," said Lars Rasmussen, economist with Danske Bank. "People just made money very easily over four to five years. Investors neglected the risks or didn't realize how big the risks were on the positions they took," he said.

In the meantime, the world's key central banks have moved to bolster shaky credit markets by pumping in billions of liquidity to try to ease the credit squeeze and cutting rates. That strategy was chosen by the US Federal Reserve, while the European Central Bank decided to sit tight on monetary policy.

"Cutting interest rates can provide liquidity," former Brazilian Central Bank director Alkimar Moura said. "The crisis has to do with liquidity problems at the banks."

"But it does not address the main problem, which is to solve these problems: people who cannot afford to pay for their loans. That is the problem. Reducing interest rates may not solve these kinds of problems," Moura said.

Under some of the current rules, argues Robert Feldman of Morgan Stanley in Tokyo, the financial institutions are encouraged to extend aggressively when times are good and force them to over-contract when times are bad.

"The incentive systems need changes to avoid pro-cyclical balance sheet extension, along with better cooperation among the global authorities," Feldman said.

It also remains unclear whether the steps that have been taken or proposed will be enough to lay aside the worries about the outlook for global economic growth.

"People have to assume losses," Moura said. "When I say people I mean everybody: the borrower, the lender, the builder."

Years of solid global economic growth in the world's leading emerging economies in Asia, the Middle East and Eastern Europe means that fast-paced expansion rates in nations such as China, India and Russia have helped offset the slump underway in the US.

This is particularly the case in Europe, which, at least on the face of it, has so far been successful in riding out the current storm because of strong demand for European exports from emerging economies.

The sharp slump in the dollar on the back of the US's economic woes could help to lay the foundations for an equally dramatic rebound in the US economy later in the year as a pick up in exports helps to fuel growth.

But in the meantime, the warning lights are flashing over economies such as Spain, Britain and Ireland, where once booming property markets are rapidly turning sour.

And most analysts believe the crisis will only really start to ease up when falling price houses in key parts of the world begin to find a floor.(dpa)