Shares fall sharply on economy fears

Christine Lagarde, head of the International Monetary Fund, said the economic situation was entering a "dangerous place".

Earlier, the president of the World Bank, Robert Zoellick, said the world's economy was "in a danger zone".

The comments came after the Federal Reserve warned that the US economy faced "significant downside risks".

In Europe, the UK FTSE 100 was down 4.7%, while France's Cac-40 fell 5%. In the US, the Dow Jones fell 3%.

Mrs Lagarde told a news conference at the IMF's annual meeting in the US that the "path to recovery is narrower that three years ago," when developed economies sank into recession.

She said that international leaders must act quickly on fiscal consolidation, the repair of household debt, and reforms of the public sectors. "Time is of the essence," she said.

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