Pressure is mounting on Britsh Prime Minister Gordon Brown to find help for hard-pressed families as the new deputy governor of the Bank of England warned that the financial situation was at least as bad as the 1970s.
But Charles Bean added that he and his colleagues "havegot our fingers crossed" for recovery.
As the Prime Minister returns to his desk to work on an economic plan that will form the centrepiece of his attempt at a political fightback, Bean said that the slowdown may "drag on for some considerable time" and that social problems could be caused by the squeeze on household incomes.
It also emerged yesterday that up to a dozen junior members of the Government are among Labour MPs pressing ministers to impose a windfall tax on energy companies' profits to help people struggling with rising fuel bills.
The director general of the CBI, Richard Lambert, is also seeking action to help families hit by rising prices and the economic downturn, although he insisted that it was not right to impose new taxes on business.
Bean, speaking at a central bankers' conference in Wyoming, in the United States, said the financial crisis was a "transitory period". But he warned that every time the markets appeared to be recovering "another grenade" exploded.
He said there was a mood of "considerable caution" about next year. "We've got our fingers crossed that things will improve. But there is the recognition that there is still a long way to go yet," he said.
"It is fair to say that if you look at the shocks impinging on us this is at least as challenging a time as back in the 1970s."
Vince Cable, the Liberal Democrat Treasury spokesman, said that the economy was in "freefall".
He added: "Ministers need to focus their efforts on protecting those at greatest risk from the worsening economic situation. That means greater support for people living under the threat of having their homes repossessed and helping the large number of vulnerable people who will be hit with huge energy bills this winter."
