PARIS, September 15, 2008 (AFP) - The fall of Lehman Brothers has heightened fears that the world is about to hit its worst financial crisis in a century, analysts said.

The blue riband US investment bank filed for bankruptcy protection in New York on Monday and the shockwaves reverberated around the world -- from stock and commodities markets to central banks and governments.

'It's a shock,' said France's Economy Minister Christine Lagarde.

'A once-in-a-half-century, probably once-in-a-century type of event,' according to former US Federal Reserve chief Alan Greenspan.

The Democratic contender for the US presidency, Barack Obama, called it the 'most serious financial crisis' since the Great Depression of the 1930s.

Financial analysts say the world should have seen this crisis coming with the rescues of US mortgage giants Fannie Mae and Freddie Mac and the investment bank Bear Stearns already this year.

The extent of this crisis is hard to gauge however.

'This is a leap into the unknown because this is the first time we have seen a major bank go under,' said Elie Cohen, an economy professor at the Institut des Etudes Politique, better known as Science-Po.

This has been 'a slow motion catastrophe scenario unfolding for the past year,' with credit in ever short supply and the Western economies on the brink of recession, commented Michel Aglietta, an economy professor at Nanterre University in Paris.

Letting the disorder of Lehman Brothers huge debts end in bankruptcy risks taking 'the whole of the financial system into chaos,' he added.

Aglietta said the warning signs could be seen with the rescue of Bear Sterns by JP Morgan Chase in March, and the public takeover of Fannie Mae and Freddie Mac this month. 'The crisis has been growing through September,' said the Nanterre expert.

The Federal Reserve and US Treasury did not orchestrate a public rescue of Lehman Brothers but did extend credit lines to banks in an 'extraordinary way' after its collapse.

Ten major international banks have also set up their own 70 billion dollar emergency fund to help counterparts short of liquidity.

Not everyone is despondent about the future of the financial system however.

Nobel economics prize laureate Joseph Stiglitz said the crisis posed no 'short-term systemic risk' as he took a swipe at Greenspan.

Stiglitz told AFP the turmoil should be less serious than the 1929 US stock market crash that led to the Great Depression.

'The general view is that we have instruments, monetary and fiscal policy, that we know how to prevent another Great Depression,' he told AFP.

'The widespread belief is that the Fed and Treasury did make some examination of the risks before taking the decision not to bail out Lehman.

'So we can be confident there is no short-term systemic risk,' he added, although he nonetheless criticised as arbitrary the decision to save Bear Stearns in March, but not Lehman.

Stiglitz said the turbulence 'will contribute to a real slowdown (but) not to a real crisis, that is, a failure of a large number of financial institutions.'

Laurent Quignon, an economist for BNP-Paribas bank, said the risk of a financial collapse was just 'quite moderate ... It is hard to imagine the American authorities allowing a large number of bankruptcies.

'There have already been colossal banking crises in Japan, Sweden and Norway and nationalisation was the solution found,' Quignon noted.