By Richard Johnstone | 5 April 2012

International Monetary Fund managing director Christine Lagarde has called for higher contributions from member countries, warning that there is a need to ‘increase our firepower’ in response to the economic crisis.

In a speech in Washington DC on Tuesday, Lagarde said that the ties between the US and European economics meant ‘the American recovery and American jobs would be in jeopardy’ if the eurozone faltered.

Highlighting the large stake the US has in how Europe and the world fares, she said the global economy needed strong American leadership.

‘Now that the Europeans have moved first with their firewall, the time has come to increase our firepower,’ she added.

Legarde told delegates at the Associated Press Annual Meeting on Tuesday that the IMF remained a good investment for all its 187 member countries, including the US.

‘The idea behind the IMF was simple – if countries worked together in the common interest and helped each other in times of need, then everyone would prosper together. If this idea was important in 1944 [when the IMF was founded], it is equally important today.’

She also warned that a worldwide ‘rush to austerity’ could prove ‘self-defeating’, as ‘undifferentiated’ cuts to public spending could hit global growth prospects.

Countries with low borrowing costs, such as the US, ‘should not move too quickly’ in cutting spending. But the US must avoid ‘complacency’ on government deficit and debt, take stronger action to curb the growth in entitlement spending, such as welfare, and look to raise more tax revenue.