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Lagarde warns global economy threatened

Dec 26 2011 13:05 Reuters

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Paris - The head of the International Monetary Fund said the world economy was in danger and urged Europeans to speak with one voice on a debt crisis that has rattled the global financial system.

In Nigeria last week, IMF Christine Lagarde said the IMF's 4 percent growth forecast for the world economy in 2012 could be revised downward, but gave no new figure.

"The world economy is in a dangerous situation," she told France's Journal du Dimanche in an interview published on Sunday.

The debt crisis, which continues into 2012 after a European Union summit on December 9 only temporarily calmed markets, "is a crisis of confidence in public debt and in the solidity of the financial system," she said.

European leaders drafted a new treaty for deeper economic integration in the euro zone, but it is not certain that the accord will stem the debt crisis, which began in Greece in 2009, and now threatens France and even economic powerhouse Germany.

"The December 9 summit wasn't detailed enough on financial terms and too complicated on fundamental principles," said Lagarde.

"It would be useful for Europeans to speak with a single voice and announce a simple and detailed timetable," she said. "Investors are waiting for it. Grand principles don't impress."

Part of the problem, she said, has been national calls for protectionism, making it "difficult to put in place international coalition strategies against it."

Lagarde added: "National parliaments grumble at using public money or the guarantee of their state to support other countries. Protectionism is in the debate, and everyone for themselves is winning ground."

She did not specify which countries she was referring to.

Emerging countries, which had been growth engines for the world economy before the crisis, have also been affected, said Lagarde, citing China, Brazil and Russia.

"These countries, which were the engines, will suffer from instability factors," she told the newspaper.

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