IMF's Lagarde calls for swift action on financial risks

IMF director Christine Lagarde calls on world leaders to work together as the global economy remains fragile.

NEW YORK (CNNMoney) -- The director of the International Monetary Fund urged policymakers Thursday to remain vigilant in the face of a still fragile global economy.

Christine Lagarde said world leaders should "seize the moment" by taking advantage of improved conditions to push ahead with policies that will boost growth and strengthen the international financial system.

"Only a few months ago, we seemed to be staring into the abyss," Lagarde said in a speech at the Brookings Institution. "More recently, some data have indicated that the United States may be beginning to turn the corner."

But she was quick to point out that the turmoil in global financial markets last week is a reminder that "turning the corner is never easy."

"We must not let down our guard," said Lagarde.

In particular, Lagarde pointed to the threat of a resurgent debt crisis in Europe.

"Clearly, the risk that looms largest is that sovereign and financial stresses return with renewed force in Europe," said Lagarde.

She praised the decision by European Union leaders to build a larger financial firewall, but said the European Central Bank and individual EU nations still need to do more to boost economic growth, stabilize banks and move towards fiscal integration.

Last month, eurozone finance officials announced plans to boost their crisis resources to €700 billion by combining two bailout funds. The IMF had called for a €1 trillion financial firewall earlier this year, but Lagarde suggested that the estimate may have been too high.

"The needs now may not be quite as large as we had estimated earlier this year," said Lagarde. However she stressed that "the risks and the needs are still sizeable, and it would be imprudent to think otherwise."

Lagarde said the first priority is to keep the financial crisis at bay. But she also urged officials to focus on ways to move the global economy beyond the crisis and foster sustainable growth.

In addition, she said greater cooperation is needed to manage the "tectonic shifts" taking place in the global economy as emerging economies such as China make up a larger share of global growth.

She said officials should not dawdle.

"I think we have a breathing moment, but not a very long one," said Lagarde.

The remarks came ahead of the annual meetings of the IMF and World Bank next week in Washington, D.C. Lagarde said she hopes officials will renew the "sense of collaboration" that prevailed during the 2008 financial crisis.

The IMF is seeking to raise $500 billion to meet an expected $1 trillion in funding needs over the next few years.

"We need to increase our resources," said Lagarde. "The fund needs to be able to stand behind all its members and meet the needs of all those affected by the crisis -- those at the epicenter, and those who are bystanders."

The United States is the largest shareholder of the 187-member IMF, which lends money to nations in need and helps maintain the stability of the global financial system. But the U.S. government has made clear that it believes the IMF has sufficient funding.

Eurozone nations recently pledged to provide €150 billion in bilateral loans for the IMF, and Japan has also suggested that it could provide additional resources.

"I have been encouraged by the expressions of support by many of our member countries to increase our resources," said Lagarde. She is hopeful that "progress will be made" on the issue of IMF resources at next week's meeting.