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The European financial crisis is “escalating” and is so serious that it is unlikely to be solved by eurozone countries alone, the head of the International Monetary Fund warned last night.
British taxpayers are now likely to be involved in an internationally co-ordinated bail-out led by the International Monetary Fund [IMF] for countries in the single currency.
, the managing director of the IMF, said the escalating crisis now needed to be addressed as “collectively as possible”. Without action, the world faces the spectre of a 1930s-style depression, she said.
Mrs Lagarde spoke out after other European countries indicated that they were unlikely to back a new treaty designed to shore up the single currency.
Hungary and the Czech Republic said they would not agree to any new deal that involved European-wide taxes. David Cameron has already vetoed any British involvement. Yesterday, the head of the IMF described the prospects for the global economy as “quite gloomy”.
“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating,” Mrs Lagarde said.
“If the international community doesn’t work together, the risk from an economic point of view is that of retraction, rising protectionism, isolation.
“This is exactly the description of what happened in the Thirties and what followed is not something we are looking forward to.”
She added: “It is not a crisis that will be resolved by one group of countries taking action.
“It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action.”
Mrs Lagarde said global economic leaders needed to take a holistic approach toward addressing systemic weaknesses, such as those exposed by the current euro crisis. “It is going to require efforts, it is going to require adjustment, and clearly it is going to have to start from the core of the crisis at the moment, which is obviously the European countries and in particular the countries of the euro zone,” she said.
The remarks are her most outspoken warning yet on the need for co-ordinated international action, which she likened to Alexander the Great splitting the Gordian knot. “It is really that Gordian knot that needs to be cracked, that needs to be addressed as collectively as possible, starting with those at the centre but with the support of the international community probably channelled through the IMF,” she said.