Christine Lagarde, during a speech in Dublin on Friday, made a fresh appeal to EU countries with the euro that they should have a communal ‘rainy-day’ fund in place to protect them against any future economic downturn. This, she said, would allow countries to avoid having to raise taxes and cut spending.

She added it was “critical” for European countries to prepare for taking on any industries that might move from Britain following Brexit, which is to happen in March next year, such as ensuring relevant regulatory bodies were able to take on any increased responsibilities.

“During the last crisis, there was an overreliance on monetary policy. Simply put, the euro area should not repeat the mistakes of the past,” she said.

“Greater risk-sharing combined with larger national buffers would allow countries to avoid having to raise taxes and cut spending when the next downturn comes.”

In March, the IMF introduced its proposal for a ‘rainy-day’ fund, which member states would contribute to each year to build up assets in “good times” and in turn receive transfers during a downturn. 

“But no matter which proposal is eventually adopted, every country has a responsibility to comply with common fiscal rules and reduce public debt in places where it is too high,” the IMF chief said.

Lagarde also called for policy makers to continue their work to ensure their own economies are “more resilient and productive” by implementing structural reforms.

“More fiscal integration and true banking and capital markets unions will not address the structural weaknesses holding back growth in many countries,” she said.

Growth across the eurozone is strong and unemployment is declining. Lagarde said: “This moment is the time to tackle the tough challenges.”