International Monetary Fund chief Christine Lagarde has called on global policymakers to pursue urgent action - including forcing European banks to bulk up their capital - to prevent a descent into a renewed world recession.
Speaking at a conference for top officials and leading economists from around the globe, IMF Managing Director Christine Lagarde said developments this summer have indicated ‘we are in a dangerous new phase’.
In her first major policy address since taking the helm at the IMF in July she called for mandatory substantial recapitalisation of European banks, saying such a move was key to 'cutting the chains of contagion' in the continent's spreading debt crisis.
Ms Lagarde also warned advanced economies away from tightening their belts so fast that they imperil recovery insisting that macroeconomic policies must support growth.
She suggested a fractured political process in Europe was contributing to insecurity and urged Europe to recommit to a common vision built on solid foundations, including fiscal rules that actually work
European banks have been under pressure to raise more capital after stress tests last month showed a potential vulnerability to losses on European sovereign debt, particularly Greek bonds.
