Lagarde warns Eurozone and US to get a grip on escalating debt crises

NEW IMF chief Christine Lagarde yesterday warned a US default or significant credit downgrade would be a “very, very serious event”.

She hinted that the US should look to the strong leadership shown by EU leaders in recent weeks, a dig at the political infighting in Washington that threatens to derail US debt talks.

She said: “I’m hopeful that the political courage shown by European leaders will soon be followed by bold fiscal action in the US.”

She also said there is much work yet to be done on the Greek rescue plan, reflecting market uncertainty over the deal.

EU leaders and banks agreed last week to a rescue deal that offers Greece more cash and easier loan terms to keep it afloat and avoid further contagion.

Speaking at the Council on Foreign Relations in New York, Lagarde said the IMF may need extra resources to give it the leverage to help countries facing balance of payments issues. She said: “In the not too distant future we will probably have to visit this issue.”