The head of the International Monetary Fund (IMF) has said the global economy is not growing at a fast enough pace and faces a number of risks to recovery.

Christine Lagarde warned a threat of global recession remained and called for coordinated policy action.

She said this should include the mandatory recapitalisation of European banks.

Ms Lagarde was speaking at a US Federal Reserve meeting at Jackson Hole, US.

“Developments this summer have indicated we are in a dangerous new phase,” she said.

“The stakes are clear; we risk seeing the fragile recovery derailed – so we must act now.”

Recession risk

Following on from the financial crisis of 2008/09, growth in the US and Europe remains patchy, while debt worries in both continues to shake market confidence.

“The global economy continues to grow, yet not enough. Some of the main causes of the 2008 crisis have been addressed, yet not adequately,” Ms Lagarde said.

“There remains a path to recovery, but we do not have the luxury of time.”

She said the advanced economies which are struggling must ditch long-term plans for now to bring their debt under control, yet at the same time not introduce austerity measures so fast that it imperils recovery,

“Put simply, macroeconomic policies must support growth,” Ms Lagarde said in her first major policy speech since taking the IMF reins in July.

“Monetary policy also should remain highly accommodative, as the risk of recession outweighs the risk of inflation,”