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FRANKFURT, Sept 16 Options for a sustainable
economic recovery are narrowing, Christine Lagarde, Managing
Director of The International Monetary Fund, said in an opinion
piece for a German newspaper.
"I believe there is a way to achieve a sustainable recovery,
although this path is narrower than before, and is narrowing
further still," she wrote in a piece published in daily
Handelsblatt on Friday.
Global economic recovery should be driven by shifting
economic demand from the states to the private sector, she said,
adding that had not yet happened.
Repeating warnings she has made on several occasions in the
past month, Lagarde said weak economic growth and weak balance
sheets at banks and nation states are causing a crisis of
credibility that in turn weakens growth further.
"This vicious circle is gaining momentum and was aggravated
by indecision and the malfunctioning of politics."
Risks to financial stability have grown significantly with
the ongoing sovereign debt problems, she said, and without
decisive action there is a real risk that the large economies
"will stumble rather than move forward", Lagarde said.
Reforms are needed to close regulatory gaps in the financial
sector. Particularly in regard to cross border solutions, and
structures seen as being too important to be allowed to fail.
The fact that these problems remain three years after the
collapse of U.S. investment bank Lehman Bros is cause for
concern, Lagarde said.
(Reporting By Edward Taylor; editing by Patrick Graham)