World economy enters ‘dangerous new phase of crisis,’ IMF chief

WASHINGTON (Kyodo) — International Monetary Fund Managing Director Christine Lagarde on Thursday urged policymakers of advanced economies to cooperate in tackling European debt crisis and other financial problems, saying, “We have entered a dangerous new phase of the crisis.”

“Without collective, bold action, there is a real risk that the major economies slip back instead of moving forward,” Lagarde said in a speech in Washington.

“Exact three years after the collapse of Lehman Brothers, the economic skies look troubled and turbulent as global activity slows and downside risks increase,” she said.

The IMF chief said that balance sheet problems such as the sovereign debt crisis and debt in the U.S. households are feeding negatively on each other, fueling a crisis of confidence and holding back demand, investment and job creation.

“This vicious cycle is gaining momentum and, frankly, it has been exacerbated by policy indecision and political dysfunction,” Lagarde said.

The eurozone debt crisis and financial strains are expected to dominate the Group of 20 meeting of finance ministers and central bank governors next week in Washington.