"Influenza pandemics must be taken seriously precisely because of their capacity to spread rapidly to every country in the world," WHO Director General Margaret Chan told a news conference in Geneva as she raised the official alert level to phase 5, the last step before a pandemic.

"The biggest question is this: how severe will the pandemic be, especially now at the start," Chan said. But she added that the world "is better prepared for an influenza pandemic than at any time in history."

Mexico said it had suffered another 17 deaths of patients potentially linked to swine flu, bringing the total to as many as 176, and called for a suspension of all non-essential work and services.

Already in Mexico City, a metropolis of 20 million, all schools, restaurants, nightclubs and public events have been shut down to try to stop the sickness from spreading, bringing normal life to a virtual standstill.

Nearly a week after the H1N1 swine flu virus first emerged in California and Texas and was found to have caused dozens of deaths in Mexico, Spain reported the first case in Europe of swine flu in a person who had not been to Mexico, illustrating the danger of person-to-person transmission.

Both US and European officials have said they expect to see swine flu deaths.

President Barack Obama said during an evening news conference at the White House there was no need for panic and rejected the possibility of closing the border with Mexico.

"At this point, (health officials) have not recommended a border closing," he said. "From their perspective, it would be akin to closing the barn door after the horses are out, because we already have cases here in the United States."

Obama also praised his predecessor for stockpiling anti-viral medication in anticipation of such an outbreak.

"I think the Bush administration did a good job of creating the infrastructure so that we can respond," Obama said. "For example, we've got 50 million courses of anti-viral drugs in the event that they're needed."

Despite worries that a major flu outbreak could hit the struggling global economy, world stocks rallied on Wednesday after the Federal Reserve said the U.S. recession appeared to be easing.

Almost all cases outside Mexico have had mild symptoms, and only a handful have required hospitalization.

Chan also urged companies who make the drugs to ramp up production. Two antiviral drugs -- Relenza, made by GlaxoSmithKline and Tamiflu, made by Roche AG and Gilead Sciences Inc. -- have been shown to work against the H1N1 strain.

Drugmakers have donated millions of doses of their drugs to the WHO. She also alerted governments to be ready to distribute stockpiles of their drugs. Vaccine makers were on standby to begin making a new vaccine if needed.

Germany, Austria and Peru reported cases of the illness, bringing the number of affected countries to 10. Peru said its case involved a woman who had traveled to Mexico and its health minister immediately announced the suspension of all commercial flights arriving from that country.

Texas officials said a 22-month-old boy had died while on a family visit from Mexico, marking the first confirmed U.S. swine flu death. In the Texas border city of Brownsville, where the boy was first diagnosed, some residents said they were now reluctant to venture south to Mexico.

"I am extremely concerned because you could die," said Santiago Perez, 18, a student at Pace High School.

Kathleen Sebelius, Obama's newly confirmed health secretary, spent her first day in office on a media tour as the administration sought to calm fears while urging vigilance. "We know that the cases will continue to rise," Sebelius said.

Mexico's central bank warned the outbreak could deepen the nation's recession, hurting an economy that already shrank by as much as 8 percent from the previous year in the first quarter.

France said it would seek a European Union ban on flights to Mexico.

The EU, the United States and Canada have advised against non-essential travel to Mexico, and many tourists were hurrying to leave, crowding airports. - Reuters

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