The head of the International Monetary Fund yesterday warned world leaders that they are running out of time to prevent another global slump and urged them to rediscover a "collective momentum" in order to head off disaster.
Speaking in advance of the opening of the IMF's annual conference in Washington, Christine Lagarde repeated warnings that the international economy is entering a "dangerous phase". She also drew a contrast with the financial crisis in 2009, cautioning that "the path for recovery is narrower than it was three years ago".
Speaking as global stock markets plummeted, Ms Lagarde said that global policy should not be driven by investor panic. The IMF's prescriptions, she said, "will not be dictated by the day-to-day variation of the Dow Jones, the Nasdaq, the Cac or the Dax".
She also asserted that investors in sovereign bonds were not giving some eurozone nations enough credit for the efforts they have made to get their public finances under control.
But Ms Lagarde did insist that European governments must act swiftly to recapitalise their banks, saying "three years [since the last crisis] we are still not advanced as we should be in terms of financial reform. This is fuelling a lack of confidence. There has been huge progress, but more needs to be done". This week the IMF identified a potential €200bn (£176bn) hole in the European banking sector.
Asked about the slow response of European policymakers to the crisis, Ms Lagarde stressed the importance of national parliaments throughout Europe ratifying the emergency measures taken by national leaders in July. "We are no longer in Napoleonic times when a leader could snap his fingers and make something happen," she said.
Ms Lagarde also emphasised that the Europe's response had significant political implications. She said: "It is not only about economics, about finance, it is also about political, collective destiny from countries that have spent centuries fighting each other and are determined to stay together."