Europe needs more growth, bigger firewall: Lagarde

The head of the International Monetary Fund says the eurozone needs stronger economic growth and bigger financial firewalls to resolve its debt crisis and help prevent a downward global spiral.

Christine Lagarde was speaking in Berlin on Monday after meeting German Chancellor Angela Merkel, who has put austerity at the centre of the eurozone rescue effort and is reluctant to enlarge bailout funds.

According to her prepared text, Ms. Lagarde said that “across-the-board, across-the continent, budgetary cuts will only add to recessionary pressures.” She says several countries must tighten finances quickly “but this is not true everywhere.”

She also advocates increasing the size of the eurozone’s permanent rescue fund, the 500 billion ($650 billion) European Stability Mechanism.