An emergency interest rate cut by the U.S. Federal Reserve on Tuesday that followed two days of plummeting stock prices set the tone for the annual meeting of the World Economic Forum, where financial, industrial and political figures, including U.S. Secretary of State Condoleezza Rice, are awaited.

Rice is set to give the opening address at Davos by focusing on what she refers to as "American realism" in the world.

Rice will also be meeting Pakistan President Pervez Musharraf as well as separately with Afghan President Hamid Karzai on the sidelines of the Alpine forum.

It will be Rice's first encounter with Musharraf since the assassination last month of opposition politician Benazir Bhutto, which plunged the nuclear-armed country, a key ally in the U.S. war against al Qaeda, into crisis.

Rice told reporters travelling with her that she would stress the need for Pakistan's Feb. 18 elections to be free and fair and for a strong move to democratic reforms but she also made clear that she would underline Washington's commitment to Pakistan as an ally in the fight against terrorism.

During her brief stop in Switzerland, Rice will also meet Ukrainian President Viktor Yushchenko and Swiss leaders.

FIRES AT HOME

On the economic front, policymakers accustomed to apres-ski fireside chats will this year confront a banking crisis and a widely forecast recession, with policy differences between the United States and Europe at the fore.

The Fed's unilateral action on Tuesday -- its biggest emergency cut in two decades -- will either put pressure on the European Central Bank to relax its hardline view against cutting rates and coordinate a response or admit a policy rift between Europe and the United States.

Worries are intensifying that fallout from the credit crisis -- which began in earnest in August when the U.S. subprime mortgage crisis led to a seizure in interbank lending -- will be felt in virtually all corners of the globe.

"I don't think there is a country that will avoid the effects, including South Africa," African National Congress president Jacob Zuma, the country's likely next leader, told Reuters.

"The U.S. economy is a big economy so when something happens there it will begin to impact others," he said after arriving in the Alpine city that hosts the summit each year.

Earlier, the U.S. Federal Reserve made its biggest emergency interest rate cut in more than two decades in a bid to fight off worries of a U.S. recession as European and Asian shares slumped for the second day straight and U.S. shares eased.

New York Federal Reserve chief Timothy Geithner may be called upon to explain the move, which will pile pressure on ECB President Jean-Claude Trichet and ECB council member, Bundesbank President Axel Weber-- all three due in Davos -- to follow suit.

European policymakers have held a harder line than those in the United States, pointing rather to inflationary dangers than those to growth, despite mounting pressure to relax their stance.

"The situation is much more serious than any other financial crisis since the end of World War Two," said billionaire investor George Soros, also expected at Davos, according to an interview with the Austrian daily Standard.

SEARCH FOR A SAVIOUR

Those in search of solutions emerging from the Alpine retreat that ends on Sunday may wind up disappointed.

Several policymakers necessary to form a critical quorum at Davos have dropped out of the event over the past week due to intense domestic demands.

U.S. Treasury Secretary Henry Paulson and British finance minister Alistair Darling have both withdrawn at short notice.

While banking leaders such as the heads of Citigroup , Merrill Lynch and UBS are all scheduled to attend, expectations for last-minute cancellations are intensifying as pressing matters mount at home.

Instead, the focus of the meeting is expected to turn toward the growing strength of countries like India and China, or the burgeoning riches of oil exporters such as Saudi Arabia, Kuwait or the United Arab Emirates.

"In Asia, especially in India, we have strong fundamentals. With India and China being the drivers of the global economy the resilience of India and China will become a shock absorber," Indian Commerce and Industry Minister Kamal Nath told journalists in Davos.