International Monetary Fund managing director Christine Lagarde has called for countries to pull back on austerity measures over fears they could be dampening growth.
According to the Financial Times, Lagarde (pictured) told delegates at the annual meeting of the IMF and the World Bank that it is no longer sensible for European governments to pursue spending cuts and tax rises if growth slows.
Earlier this week, the IMF warned that governments around the world have underestimated the damage austerity has caused to growth.
She said: “We do not think it is sensible to stick to nominal targets.”
Lagarde was speaking days after the IMF cuts its 2012 and 2013 growth forecasts.