Global economic policymakers were girding up for their own type of combat, bracing for the consequences of a longer war in Iraq while urgently hoping for quick and decisive one with minimal damage.

Analysts say a short war could foster a nearly ideal situation: preserving some recent buoyancy in world stock markets, letting the air gently out of inflated oil prices and giving consumer confidence a needed shot in the arm.

But US, European and Japanese policymakers worry more about the potential pitfalls of war, particularly when concern about potential terror attacks is factored in, and no one is taking quick victory and economic recovery for granted.

"On the brink of war with Iraq, Americans should be prepared for what we hope will be as precise and short a conflict as possible, but there are many unknowns. It could be a matter of some duration, we do not know," White House spokesman Ari Fleischer said on Tuesday in comments that could apply equally to military or economic prospects.

One step at a time

There is no evidence that central banks in the major regions have consulted beforehand about measures to bolster the global economy if necessary.

Some analysts question how easy it would be to do so -- or even how appropriate -- after the bruising United Nations debate leading up to the US decision to initiate action against Iraq, which was opposed by several industrialized countries, including France and Germany.

But there is little doubt they can act in their own regional interest in a way that leads to virtual coordination when deemed necessary -- much as happened after the September 11, 2001, terror attacks when central banks reduced rates to bolster a shocked and faltering global economy.

The intent, as it would be in the event of a longer or tougher war in Iraq, would be to pump liquidity, or cash, into financial markets to keep them from seizing up, to add impetus for growth through cheaper credit and keep currencies stable.

"The starting point in (Federal Reserve) Chairman (Alan) Greenspan's thinking has to be what is likely to be the duration and impact of war," said economist David Jones of DMJ Advisors.

Damage control or crisis?

"If it's transitory as is hoped, then it's a matter of damage control but if war lingers it becomes crisis management and we would look for large rate cuts like right after 9/11 or for a big injection of liquidity as happened in late 1987 when the stock market crashed," Jones said.

Fed policymakers on Tuesday, after keeping rates steady because they couldn't gauge the looming war's economic impact, said they were initiating ‘heightened surveillance' in a sign they could move quickly to reduce rates.

Japanese officials said they will step up monitoring of currency and oil markets. The incoming governor of the Bank of Japan, Toshihiko Fukui, said the central bank would be on 'war-time mode' once the conflict began and the BOJ would 'act if there is shock or widespread fear in the market.'

Similarly, a spokesman for the European Central Bank said it was monitoring financial markets as it routinely does to ensure they operated smoothly.

It can quickly counter disruptions by conducting special refinancing auctions of debt securities to keep liquidity in the system, as it did after the Sept 11, 2001.

Economist Sung Won Sohn of Wells Fargo Bank in Minneapolis said war, and especially a prolonged one, heightened the likelihood of volatility in financial and currency markets, which might force policymakers to act more aggressively.

"They have to ensure that excessive volatility is dampened and that might mean, in forex (foreign exchange) markets for example, intervening more aggressively and in oil markets it could mean releasing some of our oil reserves," Sohn said.

But he strongly doubted any advance discussions have taken place between policymakers on these or other possible moves.

"We've certainly not seen any indication that policymakers have had such discussions and it might be premature for them to do so before a war even starts, much less seeing how it goes," Sohn said. "I think that would be seen as bad form."

The Gulf Crisis: Complete Coverage