Top officials from two of the world's largest economies are urging Europe to move now in order to stop the continent's debt crisis from undermining the global economy.
U.S. Treasury Secretary Timothy Geithner and China's central bank governor Zhou Xiaochuan delivered their warnings during speeches to leaders of the International Monetary Fund Saturday.
Geithner called government debt and bank debt in Europe the biggest risks to the world economy. He said without conclusive action by European governments and the European Central Bank, the threat of what he called a "cascading default" will thwart any other recovery efforts.
Brazil’s Finance Minister Guido Mantega criticized the US and Europe for creating a scenario of “prolonged stagnation with high unemployment.”
Zhou also called for the European debt crisis to be "resolved promptly." He warned the IMF may not have enough money to deal with an increasing demand for aid.
IMF Managing Director Christine Lagarde, speaking at the IMF's semi-annual policy meeting, said the Fund’s resources could not support potential crisis needs. Lagarde pledged to work together to combat global economic instability. She said she has submitted an action plan to do more work on financial safety nets.
The European Union and the IMF have already provided billions of dollars to prevent the Greek economy from collapsing, and senior German officials have expressed concerns that Greece may not be able to stick to some of its promised austerity measures.
There are also concerns about the financial health of countries like Portugal and Ireland.
On Friday, Lagarde said the global economy is in the grip of a "crisis of confidence" and urged nations to move quickly and act together to solve problems.
The comments come as finance ministers and central bankers from around the world gather in Washington for talks with World Bank officials and others.
Global markets sustained major losses earlier this week after the U.S. central bank warned that it sees "significant downside risks" to the already struggling U.S. economy, and that a complete recovery is years away.