Christine Lagarde, the head of the International Monetary Fund, said she expected "courageous and cooperative action" as she laid blame on Europe and the United States for fostering a sense of unease that has led companies to delay investment and hiring.

"There are threats on the horizon, threats that can be addressed, should be addressed but are not necessarily addressed," she told reporters ahead of the IMF's twice-yearly meetings in Tokyo.

The IMF cut its global growth forecast this week for the second time since April and said Europe's debt repair process was critically incomplete.

But German Finance Minister Wolfgang Schaeuble said Europe was on track and had accomplished more than it may appear to the outside world.

"I am convinced that we will be able to tell our friends and partners around the world that Europe is in the process of solving its problems and Europe is aware of its responsibility," he said.

U.S. Treasury Secretary Timothy Geithner said Washington had a window of opportunity after the November 6 presidential election to negotiate a debt reform framework.

The differing views offer a glimpse into the tricky politics surrounding the IMF meetings.

European officials are keen to ensure their region is not the sole topic of discussion, and want more attention placed on the difficulties Washington faces addressing its "fiscal cliff" of automatic spending cuts and tax increases that will take effect early next year unless Congress acts.

Geithner said the magnitude of fiscal policy reforms that the United States needed to achieve debt sustainability was between 2 percent and 3 percent of gross domestic product, which he pointed out was "a modest challenge relative to what most countries around the world face on the fiscal side."

"Our belief is that we can use the period between the election and the end of the year to negotiate a framework of reforms that can be phased in over time," Geithner said.

Finance ministers and central bankers from the Group of Seven industrial nations - the United States, Japan, Canada, Italy, Britain, Germany and France - huddled during the afternoon to discuss their challenges, but were not expected to issue a statement outlining their views.

EMERGING MARKETS STUNG

The economic slowdown has not spared emerging market economies, which were instrumental in pulling the global economy out of recession in 2009. Brazil cut interest rates on Wednesday to a record low and South Korea cut rates on Thursday.

"Developing countries, which have been the engine of growth, will not be immune to the increased uncertainty in the global economy," said World Bank President Jim Yong Kim.

"The economic announcements emanating in recent weeks have been sobering. Everyone is vulnerable in times of uncertainty but especially the poor who have few, if any, safety nets and resources and live from day to day."

The IMF has expressed frustration with Europe's piecemeal response to its debt crisis and warned that a recent respite in borrowing costs for debt-laden countries such as Spain may prove short-lived unless euro zone leaders come up with a comprehensive and credible plan.

In its financial stability report on Wednesday, the IMF said that without swift policy action, including the triggering of the European Central Bank's bond-buying program, the premium that investors demand to hold Spanish and Italian debt instead of safer German bonds would nearly double.

Standard & Poor's cut its rating on Spain on Wednesday to a level just above junk territory, and Moody's may soon follow.

The IMF has said it stands ready to support a European bailout for Spain, should Madrid ask. Reuters reported on October 1 that Spain was ready to seek help, but that Germany was blocking an aid request because it preferred to combine a Spanish rescue with additional assistance for other struggling countries such as Greece.

Jose Vinals, the head of the IMF's monetary and capital markets department, warned that countries must not withhold help if Spain were to ask the European Central Bank to buy its bonds under a new bailout program, known as OMT for Outright Monetary Transaction.

"If it were to be the case that they decide to activate this mechanism and they can submit to the proper degree of conditionality, it would be essential that the creditor countries do not negate this activation of the OMT for Spain or for any of the countries," Vinals told Reuters.

Lagarde said the IMF was open to giving both Spain and Greece more time to reduce their budget gaps.

The Fund itself is struggling to muster the sort of decisive action that Lagarde wants to see from world leaders. Its 188 member countries meet on Friday and Saturday, and will fall short of a goal to implement voting reforms that would give large emerging economies greater say and elevate China to the No. 3 spot in IMF power.

A territorial dispute between Japan and China added another element of disharmony. China's top central bank and finance ministry officials backed out of the meetings and sent deputies to Tokyo instead. Lagarde said she hoped the world's second- and third-largest economies could resolve their differences "harmoniously and expeditiously."

"I think they lose out by not attending the meeting," she said of the Chinese officials. "And they will be missing something great."

(Additional reporting by Anna Yukhananov, Lesley Wroughton, Antoni Slodkowski and Julien Toyer; Writing by Emily Kaiser; Editing by Tim Ahmann and Neil Fullick)

• A Permanent Economic Emergency