KENNETH Clarke repeated his warning about the perils of a hung parliament today, saying the International Monetary Fund (IMF) would be forced to step in if politicians could not get a grip of Britain's deficit.

The shadow business secretary invited criticism from political opponents earlier in the week when he first made his warning about panic in the financial markets if no party wins an outright majority on polling day.

Speaking after the second televised prime ministerial debate of the election campaign, Mr Clarke attacked the Liberal Democrats' manifesto, saying: "If actually they thought they would be up there in the polls I can't imagine they would have produced the ridiculous document they produced.’’ He added: "Nick (Clegg) has been given an opportunity by appearing alongside the other two and he is an attractive and accomplished man.

"My concern is that this distracts people from the very serious nature of this election. We have a grave economic crisis.

"I simply fear an inconclusive election result, a situation where the three politicians who have such genuine disagreements are asked to lead parties into somehow cobbling together an approach to an economic crisis.

"If the British can't form a proper government and people believe we can't manage our debt then the IMF will have to do it for us.’’ He said he "enjoyed’’ last night's debate between Mr Clegg, David Cameron and Gordon Brown.

Responding to figures on the economy published today, which showed a 0.2% rise in output for the last quarter, he said: "I think everybody senses we are just bouncing along, barely growing.

"I'm not surprised by the fact we are barely growing at all.

"The public must not be lulled into a false sense of complacency in this election. There remains a serious risk of further financial collapse.’’ He referred to Chancellor Alistair Darling's recent comments about "deeper and tougher’’ cuts than those introduced under Margaret Thatcher.

"If we don't face up to the scale of the problem, we will drive up interest rates.

"If anything will bring investment to a halt, choke off growth, it's driving up interest rates.’’ Any claim by Mr Brown that "he has solved the recession and we are on the way to recovery is complete rubbish and I think he knows that only too well’’.

"The idea that cutting wasteful spending is taking money out of the economy when putting tax up isn't strikes me as incomprehensible,’’ he added.

"As an economic policy from a former Chancellor that's quite pathetic.’’ Mr Clarke was campaigning in the target seat of Cardiff North. While meeting shoppers in the leafy suburb of Whitchurch he bumped into former First Minister and fellow jazz fan Rhodri Morgan, whose wife Julie is defending a majority of 1,146 against Conservative candidate Jonathan Evans.

The pair discussed the prospect of Cardiff City and Nottingham Forest facing each other in the Championship play-offs, but Mr Clarke did not take up the other's offer of some light refreshment.

"Are you sure you don't want a pint? You can't visit Cardiff without having a pint of Brains,’’ Mr Morgan said.