"Entrepreneurs across the board, don't drive us further," Mugabe warned in a nationally televised address after the currency announcement. "If you drive us even more, we will impose emergency measures. ... They can be tough rules."
But in a glimmer of possible rapprochement in Zimbabwe's political turmoil, opposition leader Morgan Tsvangirai revealed that he met with Mugabe last week for the first time in years and discussed the "pitfalls in any future government" that might emerge from the negotiations.
He didn't indicate their meeting produced any agreement, however.
In a conciliatory gesture, Tsvangirai told Britain's Channel 4 that his longtime rival is as "human as everyone else." However, he added the president is "in denial" about the economic problems and political violence that have swept this once prosperous southern African nation.
Central Bank Gov. Gideon Gono announced he was dropping 10 zeros from Zimbabwe's currency, effective Friday. The move comes a week after the issue of a 100 billion-dollar note - still not enough to buy a loaf of bread.
Gono said the new money would be launched with 500-dollar bills. He also said he was reintroducing coins, which have been obsolete for years, and told people to dig out their old ones.
That could be a boon for Fungai Matambo, a 33-year-old vendor of airtime for cell phones who said she has kept a large milk pail full of old coins.
"I'm very happy now," she laughed. "In the old terms, I'm a multi-trillionaire!"
But, she noted, there is little to buy in the shops amid chronic shortages of food, medicine, power and water.
John Takawira, 28, who works in an Internet cafe, said the latest move would do nothing to improve life in Zimbabwe, where 80 percent of the work force in unemployed.
"The prices of goods have already started shooting up," he complained. "This is not going to make any change to my poor life."
Gono acted because the high rate of inflation was hampering the country's computer systems. Computers, electronic calculators and automated teller machines at Zimbabwe's banks cannot handle basic transactions in billions and trillions of dollars.
Inflation, the highest in the world, is officially running at 2.2 million percent in Zimbabwe but independent economists say it is closer to 12.5 million percent.
Economist John Robertson said the new bills would soon be worthless since the rate of inflation continues to skyrocket. What costs $1 at the beginning of the month can cost $20 by month's end, he said.
"This is attending only to the symptoms of the problem. The real problem is the scarcity of everything driving up the prices. ... The government has not only caused the scarcities but damaged our ability to fix the problem."
At the root, he said, is the damage to the farming sector, along with government raids on the state pension fund and foreign currency bank accounts of businesses.
Zimbabwe's trials began nearly a decade ago when white farmers who were the driving force of the economy started supporting Tsvangirai's opposition Movement for Democratic Change. Mugabe sent supporters to violently invade white-owned farms, saying he was reclaiming ancestral lands for poor black peasants.
Instead, the land went to Mugabe's Cabinet ministers and generals, who left the fields untended. Hundreds of thousands of farm laborers lost their jobs and homes. Today, a third of Zimbabwe's people depend on foreign food aid in a country that once exported food to its neighbors.
Mugabe blames the economic collapse on profiteers and on sanctions by the United States and the European Union.
The worsening conditions have eroded the popularity of Mugabe, who has ruled for 28 years and was long revered for leading Zimbabwe to independence in 1980. He finished second in a March presidential ballot behind Tsvangirai, but won the June runoff after his rival dropped out after violence killed more than 120 opposition activists. Both men now claim the presidency.
In his interview with Channel 4, Tsvangirai said the two leaders had a 90-minute dinner together last week.
"I am sure that there was a common understanding that there is a need to soft land the crisis through a transitional process," he said South African President Thabo Mbeki flew in to Zimbabwe on Wednesday in yet another bid to mediate in the crisis.
Power-sharing talks that began last week have deadlocked over Mugabe's insistence that he lead any unity government and over what position Tsvangirai should hold in a new administration, according to officials, who spoke on condition of anonymity because of an agreed media blackout.
"We are still negotiating; we want to succeed," Mugabe said in his broadcast address. "You find room for compromise but sometimes compromise is difficult."
Mbeki told reporters after meeting with Mugabe that talks would resume Sunday in South Africa.
Tsvangirai's party said Wednesday that two more opposition supporters were killed last week, allegedly by Mugabe's followers. "The deaths show that there is no sincerity on the part" of the ruling ZANU-PF party, the opposition said in a statement.
But in his interview, Tsvangirai softened his rhetoric about Mugabe, who the opposition has blamed for the widespread violence.
"He is just as human as every one of us, that he has similar concerns, although, of course, I think he is ignorant, and/or chooses to be in a denial stage as far as violence is concerned," said Tsvangirai, who has been accused of treason, beaten and survived assassination attempts by Mugabe loyalists.
