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Economy in danger, warns IMF chief

The global economy has entered a dangerous phase and the heavy debt burdens could "suffocate" a recovery, the head of the International Monetary Fund (IMF) has said.

Nations must work together to meet the growing risks, said IMF managing director Christine Lagarde.

Banks must provide more capital, and governments need credible plans to get their debt under control.

Mrs Lagarde said she is worried that some governments lack the political will to shrink rising deficits. The comment appeared to be aimed at the United States, where Congress has struggled to reach agreement on a deficit-reduction plan.

"The current economic situation is entering a dangerous phase," said Mrs Lagarde at a news conference kicking off the annual meetings of the 187-nation IMF Fund and its sister lending organisation, the World Bank.

Mrs Lagarde said nations will make progress this week during the annual meetings and they will ultimately meet the challenges ahead.

The gathering of world finance leaders comes at a perilous time for the global economy. World markets are plunging amid fears that the US economy has weakened and is adding few jobs, while Europe is confronted by a deepening debt crisis.

Earlier this week, the IMF slashed its growth forecasts for this year and next. And in a separate report, the IMF said the global financial system is facing its greatest challenges since the 2008 financial crisis.

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