The IMF has urged action to stave off a global recession as a record slash in oil output by Opec and a Wall Street baron's court appearance underlined the strains in the global economy.

The call for industrialised nations to increase fiscal spending came after a record cut in US interest rates to almost zero failed to boost stock markets in Europe and Asia even though it sparked a big rally on Wall Street.

In a bid to drive up flagging oil prices, Opec ministers agreed at talks in Algeria to reduce output by 2.2 million barrels per day in the group's biggest-ever cut.

Non-member producers Russia and Azerbaijan also said they would cut output.

'My primary message is that additional - and vigorous - policy action will be needed in order to avoid a serious global downturn,' International Monetary Fund deputy managing director John Lipsky said.

In Germany, Chancellor Angela Merkel came under pressure after officials warned that Europe's biggest economy could contract by as much as three percent next year, which would mark the worst recession in its post-war history.

According to a report in the Sueddeutsche Zeitung newspaper, Germany will also take on new debt of at least 30 billion euros ($42bn) next year, more than double the amount this year.

Economists meanwhile warned that European countries faced the prospect of deflation after official EU data showed a sharp drop in euro zone inflation to a 14-month low of 2.1 per cent last month from 3.2pc in October.

IHS Global Insight economist Howard Archer said that 'a brief period of deflation certainly cannot be ruled out.'

UBS economist Sunil Kapadia said the decrease in food and energy prices could drive annual inflation 'possibly into negative territory' next year.

Russia has been lashed by some of the worst economic results since its 1998 crash. On Wednesday, the Kommersant newspaper reported that wage arrears nearly doubled last month in the sharpest such spike since the 1990s.

Russia's rapid growth over the past decade, driven largely by high oil prices, had virtually eliminated the problem of wage arrears. Non-payment of salaries was common in Russia's chaotic 1990s.

But the global economic slowdown and a plunge in the price of oil have led Moscow's stock markets to lose more than two-thirds of their value since May and threaten to cut growth sharply next year.