Bold and immediate action is required to steer the world economy through "this dangerous new phase of recovery," the head of the International Monetary Fund (IMF), Christine Lagarde, warned Friday, dpa reported. Speaking at the Chatham House think tank in London, Lagarde said that while the world was "collectively suffering from a crisis of confidence," options to overcome the crisis still existed. "While the policy options may be fewer, there is a path to recovery," said Lagarde at the breakfast conference, which was also addressed by George Osborne, Britain's Chancellor of the Exchequer. "The key message I wish to convey is that countries must act now - and act boldly - to steer their economies through this dangerous new phase of the recovery." Lagarde's remarks came just hours before she was due to take part in a meeting of Group of Seven (G7) finance ministers and central bank chiefs in Marseille, France. She urged policy makers to be "nimble" in adjusting their economic recovery programmes to "changing circumstances." In what was taken to be an implied criticism of Britain's massive deficit reduction programme, Lagarde said that while the British approach remained "appropriate," it also bore risks. "As we all know, the policy stance (in Britain) was premised on a greater role for private sector demand, especially a robust recovery in exports, to take over as the public sector retrenched," she said. "But since the summer the outlook has been more subdued, including in particular in Europe... and the US, which are the two main trading partners of the UK. So the risks and troubles are rising," she warned. However, Osborne defended the policy of his government, and said that it would stick to its austerity programme. "As (Lagarde) says, the UK's strong fiscal consolidation is essential to restore debt sustainability given the UK's very large structural deficit and large financial sector," Osborne said. "That is why Christine Lagarde says our policy stance remains appropriate. But I agree with her that policy makers must remain alert to risks," he added. The deficit reduction plans announced by the Conservative-Liberal coalition government a year ago have come under attack in Britain and among its European partners, given the fragility of the economic recovery and the wider financial crisis. -- SPA
