Lagarde urges US debt truce ‘immediately’
Wednesday July 27 2011 | 05:08 AM

International Monetary Fund managing director Christine Lagarde is to urge US lawmakers to agree on a deal to raise the country's debt ceiling.

Hailing Europe's "political courage" to rescue Greece's economy, Lagarde will say that she hopes "bold fiscal action" will be achieved next in the US. 

"On the debt ceiling, the clock is ticking, and clearly the issue needs to be resolved immediately," she said on Tuesday in prepared remarks for a meeting with think tank Council on Foreign Relations.

"Indeed, an adverse fiscal shock in the United States could have serious spillovers on the rest of the world," she said. 

Lagarde's remarks also warned that "more fundamentally, a credible fiscal adjustment plan is needed sooner rather than later".

Even though the IMF has stressed the importance of agreeing on a budget plan, the country should not attempt to speed up its fiscal consolidation in an "unduly hasty" manner because of its likely jobless recovery, she added. 

Her words echo an IMF report published on Tuesday. 

In an attempt to further its understanding of the interconnectedness of financial markets, she added that the IMF is close to finalising a study on how policies in the five most systemically important economies - China, the eurozone, Japan, the United Kingdom and the United States - affect the stability in others.