Edinburgh, Scotland -- (SBWIRE) -- 11/16/2011 -- International Monetary Fund Managing Director Christine Lagarde has warned of the risk of a “lost decade” for the global economy unless nations act together to counter threats to growth. Speaking in China, Ms Lagarde called upon Beijing to rebalance its economy. Lagarde said the ongoing debt crisis in Europe has resulted in an uncertain outlook for the global economy. The IMF chief added that whilst efforts to solve the crisis were heading in the right direction, more needed to be done to restore confidence. The comments come amid fears that the debt crisis in some peripheral countries may be spreading to some of the euro area's biggest economies. European leaders are looking to China as a potential source of funds as a sovereign-debt crisis threatens to engulf Italy, the third-biggest economy in the euro area. The "lost decade" reference carries echoes of Japan's experience of persistent deflation, mounting debts and economic impotence through the 1990s and beyond after its real estate bubble burst, an outcome many analysts fear could be repeated given the debt and property origins of Europe's problems. However, there is skepticism in China, where public opinion is firmly against bailing out countries that still enjoy far higher average incomes than Chinese.

Before arriving in Beijing, Ms Lagarde had spent two days in Moscow, trying to convince Russia to chip in some of its petro dollars to boost bailout funds for the euro zone. The so-called BRIC nations, comprising Brazil, Russia, India and China, have so far been reluctant to invest directly in Europe's rescue vehicle, preferring to contribute via the IMF. China and India said that the global economy is in a “critical phase,” in a statement after the fifth meeting in a so-called financial dialogue between the two nations, usually held each year. Chinese policy makers also worry that European plans are "not complete and not firm," according to a commentary on China's official Xinhua news agency. It criticized a lack of political will, politicians' concerns over their own re-election and a lack of coordination between EU members. European finance ministers meeting in Brussels yesterday pledged to roll out the bulked-up rescue fund next month after consulting investors and credit-rating companies over two options for translating the fund’s 440 billion euros ($607 billion) in guarantees into as much as 1 trillion euros of spending power. Lagarde said she was hopeful that the technical details of European Financial Stability Fund (EFSF) plan will be ready by December. While the US and eurozone economies have been struggling with their individual issues, Asian countries led by China have been growing robustly in recent years. However, there is a realisation that in a globalised economy, Asia is not immune from troubles in the rest of the world. The US and the eurozone are the world's two largest economic regions and are the biggest markets for Asian goods. With their economies in turmoil, consumer demand for Asian goods has slowed. In counties where exports are vital, like China and Japan, this could really hurt growth.

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