IMF chief says financial crisis has eased

• More effort is needed to spark growth%2C jobs
• U.S.%2C others should cut debt%2C but not at expense of recovery
• Europe needs a centralized banking system to promote lending

WASHINGTON --The head of the International Monetary Fund said Thursday that the global financial crisis has eased substantially but countries must do more to promote growth and alleviate rampant unemployment.

"We believe we have avoided the worst, and the economic world no longer looks quite as dangerous as it is did," IMF managing director Christine Lagarde said at the the spring meeting of the IMF and the World Bank here.

But the rally in financial markets "is clearly not translating into a sustained pickup in growth and jobs -- what really ultimately matters to most people," Lagarde told reporters.

She described the global rebound as a "three-speed recovery" with emerging markets and developing countries doing well, the U.S. and countries like Sweden on the mend and a third group that includes the eurozone and Japan with "a distance to travel."

"What we need is a full-speed recovery," Lagarde said.

Europe's financial system has stabilized after the European Central Bank announced last year that it would buy the government bonds of deeply indebted countries to lower their borrowing costs. The ECB is also providing cheap loans to banks.

But Lagarde said policymakers must "fix frayed banking systems" and establish a European banking union, which would provide a more solid backstop to banks that face crises and attract more capital to troubled banks.

Many banks are plagued by low capital and are reluctant to lend, hampering small and midsize business growth.

Although the ECB has pushed down interest rates and bought government bonds to lower long-term rates, there must be more coordination among central banks and other banks to loosen lending policy, Lagarde said.

While the U.S. and European countries are following the right path by cutting debt, the reductions too often are focused near-term, which can hurt a fragile recovery, and there aren't detailed plans for long-term belt-tightening, she said.

She praised Japan's recent decision to buy massive amounts of government bonds to jolt its economy from a 20-year period of meager growth. But she added, the stimulus "is not enough." Japan, she said, "needs an ambitious plan to bring down debt" and promote growth.

Lagarde moved to ease concerns that the recent controversial rescue of Cyprus could serve as a model for other financially troubled countries.

Cyprus is expected to receive a €10 billion bailout to settle a crisis triggered partly by the nation's bloated financial institutions. But as part of the deal. Cypress agreed to break up its second leading bank and force losses on depositors who have more than €100,000 in another financial institution.

The deal "is not a template for other countries if only because the situation of Cyprus is extremely specific for all sorts of reasons," she said.

Fears arose last week that Cypress would be forced to sell some of its gold reserves to raise revenue, triggering similar sales in other financially struggling countries. That may have contributed Monday to the biggest one-day drop in the price of gold in 30 years.

Separately, World Bank group President Jim Yong Kim told reporters Thursday that the bank has set an ambitious agenda of ending extreme poverty by 2030 and promoting stronger income growth for the bottom 40% of wage earners worldwide.