NEW YORK: U.S. stocks plunged early Friday as investors worried that a plan to ease a liquidity crisis at Bear Stearns

indicates how severe credit troubles have become. Each of the major indexes lost more than 1 percent; the Dow Jones industrials fell more than 250 points.

Investors were busy examining a plan from JPMorgan Chase and the New York Federal Reserve to provide secured funding to Bear Stearns for an initial period of 28 days. The move offers Bear Stearns relief from a sudden liquidity crunch and could help instill confidence in the stagnant credit markets.

Bear Stearns shares fell sharply, dragging down other financial companies. The stock fell $14.05, or 25 percent, to $42.95.

Stocks showed moderate gains in the early going after a Labor Department report showed the consumer price index remained flat for February. Wall Street has been expecting inflation would show an increase.

But the gains quickly disappeared after investors learned more about how close Bear Stearns appeared to have come to financial implosion.

“The Bear Stearns news reversed the early positive sentiment from the inflation data,” said Peter Cardillo, chief market economist at Avalon Partners. “There had been nervousness about Bear Stearns for some time and now the markets concerns about the company have been proven true.”

In the first hour of trading, the Dow Jones industrial average fell about 257 points to the 11,888 level.

PARIS: Air France-KLM is expected to formally submit a bid Friday for struggling Alitalia, despite union resistance and an upcoming Italian election that could threaten the deal.

The French-Dutch airline said Monday it would submit its bid to buy a majority stake in the flagship Italian carrier on Friday. Air France officials said the offer, which is conditional on Italian union approval, could come anytime before midnight.

Alitalia SpA shares dropped Friday, apparently on expectations that the value of the offer could be lower than initially proposed. After a sharp morning decline, the shares were trading down 3.8 percent in the afternoon, at 55 euro cents.

Air France-KLM shares were up 3.8 percent to \16.40, or $25.54 in Paris afternoon trading.

The bid comes as Italy awaits elections April 13-14 that could bring conservative Silvio Berlusconi back to power, replacing the center-left government that negotiated the Air France-KLM takeover deal. Berlusconi has voiced opposition to downsizing Milans Malpensa hub as part of a sale to the Franco-Dutch airline.

Air France-KLM has said it would wait for a new Italian government, which controls Alitalia with a 50 percent stake, to be formed after the elections before finalizing any deal.

Alitalia unions have so far been split on the Air France-KLM offer, with those representing pilots and cabin crew broadly in favor, and those representing the airlines loss-making ground services business generally against.

Air France-KLM Chairman Jean-Cyril Spinetta is expected to fly to Rome on Wednesday to meet with Alitalias labor unions, La Repubblica reported in its Friday Internet edition.

Alitalias board was to meet Saturday to examine progress in talks on the sale, as well as short-term financing needs for the cash-strapped airline.

Air France-KLM earlier proposed injecting \750 million (US$1.15 billion) into Alitalia through a capital increase.

La Repubblica said the bid may come short of the initial offer of 35 euro cents for each Alitalia share, and will leave the Italian government a 2 percent stake in the airline against the 3 percent originally offered. The paper said Alitalias work force is expected to be slashed by 4,000 to 13,000 under the offer.

GORDON Brown would only call an autumn general election because he feared an imminent economic downturn, Kenneth Clarke, a former Conservative chancellor said yesterday.

His attack follows a string of signals and warnings that the coming years could be tough for the UK economy.

Economic forecasters have been cutting their growth projections in the wake of the global credit squeeze, and some are even talking of a downturn in the UK housing market next year. The public finances are deep in the red, and the Treasury’s forthcoming pre-Budget report could contain more bad news.

Even some of Mr Brown’s allies have suggested that delaying an election until 2008 or 2009 could be a gamble, and Mr Clarke seized on those fears as he addressed the Tory conference in Blackpool.

“If he calls an election next week, it will not be in the national interest,” Mr Clarke said.

“It will not be anything constitutional about a mandate - he doesn’t constitutionally need an election for almost three years.

“It will be because, in my opinion, he is so worried about the outlook for the British economy that he thinks if he doesn’t go now it will be too late ever again.”

The Treasury denied political bias last night after Tory concern over the figures Labour used to attack their tax-cut plans.

George Osborne, the shadow chancellor, said the department had previously refused to release information that was used in a Labour press release rebutting proposals for raising the threshold for inheritance tax.

The Tories want to fund this by charging a flat fee of 25,000 to so-called “non-domiciles” who keep their assets abroad. However, Alistair Darling, the Chancellor, says it would raise a fraction of the 3.5 billion needed. CONFERENCE DIARY

FOUR years ago in Blackpool Iain Duncan Smith gave a conference speech so bad it effectively ended his leadership. In the same town yesterday, he was reduced to tears by a long and heartfelt ovation for his work to heal the “broken society”.

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