World Entering 'Dangerous New Phase': Lagarde

Published: Friday, 9 Sep 2011 | 7:28 AM ET By: Catherine Boyle / Staff Writer, CNBC.com

Christine Lagarde, the managing director of the International Monetary Fund, warned that the global economy is entering a "dangerous new phase" on Friday, ahead of the G7 summit in Marseilles, France.

Yoshikazu Tsuno | AFP | Getty Images

French finance minister Christine Lagarde is seen as a front-runner to succeed Strauss-Kahn.

She warned that both advanced and emerging economies faced key economic challenges, and that governments must "act now" to stop further contagion.

"Policymakers should stand ready, as needed, to take more action to support the recovery, including through unconventional measures," Lagarde said.

"The world is collectively suffering from a crisis of confidence, in the face of a deteriorating economic outlook and rising concerns about the health of sovereigns and banks."

Her speech at Chatham House in London came after a turbulent week for the markets, with the focus on sovereign debt issues in the euro [EUR=X 1.3685

-0.0196 (-1.41%)

] zone and job creation in the US.

She welcomed President Obama's new $450 billion jobs package, announced Thursday, but added "it remains critical for the United States to clarify its medium term plan."

The British government, including Chancellor of the Exchequer George Osborne, who also spoke, was warned that "risk levels are rising" in the UK and the government needs to have a "heightened readiness to respond."

However, Lagarde conceded that the government's response "remains appropriate."

When Lagarde called for the recapitalization of European banks at the Jackson Hole summit in the United States in August, a flight away from European banks resulted in the markets.

Osborne agreed that the situation is "more complex" than in 2008 but described his government's plan as a "rock of stability".

"The underlying cause is the same – excessive levels of debt," he said.

Hasn't the IMF being parroting these warnings the past 3 years; so what happened to those 'dangerous' phases they were warning about in 2008, 2009 and 2010? UK finance explains that "The underlying cause is the same – excessive levels of debt,"... so what do the IMF and the Fed and other financial authorities propose as a solution: GO INTO MORE DEBT! Isn't that what the Debt ceiling debate charade was all about, MORE DEBT! So the problem is DEBT, and to fix the problem more DEBT is proposed! It's like fighting a gasoline fire by pouring more gasoline on it! And people still think that these jokers that created the problem can fix the problem!Wake up folks! There is going to be no Recovery - More Debt = More Slavery! You will work till you drop, and if you refuse you will be dropped (six feet under) by the powers that be. These people are liars, thieves and murderers - and you want to trust your welfare and that of your children to them?