* Japan launches fresh stimulus package
* European Union leaders agree economic boost
* WTO ministerial trade talks called off
* Stocks tumble after U.S. auto bailout fails
By Mike Peacock
LONDON, Dec 12 (Reuters) - Japan and Europe sought on Friday to prop up their teetering economies after a $14 billion rescue package for America's top auto makers collapsed, deepening the worst financial crisis in 80 years.
In a further blow to recovery prospects, the head of the World Trade Organisation told ambassadors there was no political impetus to call a ministerial meeting on a global trade deal.
The G20 rich and emerging nations called last month for an outline deal by the end of 2008 to help counter the financial crisis by warding off protectionism. But high-level political will failed to filter down to the negotiating table in Geneva.
The U.S. bailout's failure in late-night Senate talks will raise fears of an industry collapse that would jeopardise millions of jobs and have knock-on effects worldwide. The car firms say one in 10 U.S. jobs rely on the sector
Stock markets took fright.
Tokyo's Nikkei average fell 5 percent and more and European shares followed suit, dropping 4.2 percent. U.S. stock futures pointed to a sizeable fall on Wall Street when it opens.
U.S. data highlighted the parlous state of the economy. Retail sales slid 1.8 percent in November, adding to October's 2.9 percent plunge.
Japan expanded its stimulus plan -- pledging to increase spending to counter rising unemployment and to cut taxes on purchases of low-emission cars -- as well as swelling a war chest for bank rescues to 12 trillion yen ($131.1 billion) from 2 trillion.
Tokyo has already announced a package of economic measures worth 27 trillion yen ($295 billion), which included 5 trillion yen in new spending and featured payouts to families, tax breaks on mortgages and relief for small firms.
EU MASKS DIFFERENCES
European Union leaders sealed a 200 billion euro ($264 billion) stimulus package, which had exposed deep differences between Britain and Germany.
Both the euro zone and Japan are already officially in recession.
Sceptics say the EU plan rests largely on national government plans already announced. But leaders will be relieved after an unusually public spat, with Berlin accusing London of 'tossing around billions', including a value-added tax cut. A decision on whether to prolong reduced rates of sales tax on local services, which Germany had opposed, was deferred until March.
British Foreign Secretary David Miliband said there was no rift but added that German domestic politics were at play before elections next year in Germany.
"What you have got is clearly internal politics in Germany," he told BBC Radio.
The euro zone clearly needs a boost -- data on Friday showed industrial output dived 5.3 percent year-on-year in October.
A failure of world trade talks would bring a new element to a crisis born of a U.S. housing meltdown, which led to bank failures and has now pushed much of the world into a recession which many experts say will be long and painful.
Analysts say it will be much harder to reach a deal next year when the world economy will already be in a much worse state, despite possible impetus from a new U.S. president.
But Lamy left leaders, such as British Prime Minister Gordon Brown who has pushed for a deal, room to save the talks over the weekend.
"Leaders have expressed a desire but this has not translated into enough will at this stage," Lamy told key WTO ambassadors.
"Unless this dramatically changes in the next 48 hours this is the reality from Geneva," he said, a participant in that meeting told Reuters.
U.S. PLAN STALLED
The U.S Senate's refusal overnight to back a rescue plan for the auto sector is also set to exacerbate the crisis.
General Motors Corp and Chrysler LLC had sought billions of dollars in immediate aid to avert collapse, while Ford Motor Co wanted a hefty line of credit.
"It's going to be a very, very bad Christmas for a lot of people," said U.S. Senate Majority Leader Harry Reid, a Democrat who favoured the bailout. "I dread looking at Wall Street tomorrow. It's not going to be a pretty sight."
GM, Ford and Chrysler employ nearly 250,000 people directly, and 100,000 more jobs at suppliers could hang on their survival.
Banks, who racked up big losses on securities tied to risky U.S. mortgages, continued to suffer -- a fact that prevents them lending to each other and oiling the global economic wheels.
Bank of America plans to cut up to 35,000 jobs over three years and Britain's HBOS, due to be taken over by Lloyds TSB, said bad debts and other charges leapt by two thirds in the last two months to 8 billion pounds.
Even China has been unable to avoid damage.
Beijing launched a 4-trillion yuan ($586-billion) stimulus plan on Nov. 9 and followed up on Wednesday with a pledge after a strategy meeting to ramp up public spending and cut taxes.
Senior officials were confident of hitting 8 percent growth in 2009 -- the rate deemed necessary to create enough jobs for the millions joining the workforce each year.
Others disagree. The World Bank forecasts 7.5 percent growth next year; Goldman Sachs expects a rate of just 6.0 percent. (Editing by Timothy Heritage)