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The new head of the IMF on Saturday 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.
"Developments this summer have indicated we are in a dangerous new phase," International Monetary Fund Managing Director Christine Lagarde said at a conference for top officials and leading economists from around the globe.
"The stakes are clear; we risk seeing the fragile recovery derailed. So we must act now,"she said.
Two years after the end of the worst of the financial crisis, growth in the United States and Europe is sputtering as government debt burdens surge.
Borrowing costs for European banks are rising as lenders balk at providing any but the shortest maturity funds on fears over bank exposure to shaky euro zone sovereign debts. Sharp swings in global financial markets have intensified strains.
Complicating the picture is policymaker indecision on both sides of the Atlantic.
European leaders are fighting over who should pay the bill for taming a raging sovereign debt crisis.
In the United States, lawmakers and President Barack Obama fought a contentious budget battle earlier this summer that resulted in the loss of the nation's coveted "AAA" debt rating from Standard & Poor's.
Federal Reserve Chairman Ben Bernanke warned here on Friday that the fight had shaken confidence and sapped U.S. growth.
Originally posted by surrealist
"Act now" to save global recovery, IMF chief urges
Two years after the end of the worst of the financial crisis,