Lagarde said the debt problems in Spain and Italy could lead to another international crisis, Voice of America reported. In the short term, however, Greece's political situation appears to have been stabilized and the threat of default averted.
"As a result, we have seen some improvements in the economic climate," she said. "But let's be under no illusion. The risks remain high, and the situation fragile."
World financial leaders will gather Friday and Saturday in Washington for meetings of the World Bank and IMF. Lagarde said they will have to be realistic and warned doing nothing to stave off economic collapse could be more costly than providing assistance.
"The needs today may not be quite as large as we had estimated earlier this year, if only because action was taken by those European institutions that I mentioned earlier," she said. "But let us make no mistake, the risks and the needs are still sizeable, and it would be very imprudent to ignore that fact."