Dismal UK economic figures - rising unemployment, stumbling wage growth and falling tax receipts - have given Lagarde, an ex-Osborne supporter, reason to fret. Lagarde is sending an IMF team to the UK shortly to review options.
Osborne under fireAlthough Lagarde and the IMF have previously supported the Coalition's austerity tack, the lack of real growth from the economy, part-indicated by lower March retail sales, is a clear concern. "What has changed is clearly the quality of the numbers," she said, reported in the Guardian.
"But I would not, and I don't think anybody in this institution would want to prejudge ahead of the article IV, [part of the IMF's economic surveillance remit] because that is when we spend three, four weeks discussing, debating, exploring, understanding, trying to go really under the skin of the economy, and we will do that."
IMF chief economist Olivier Blanchard claims Osborne is "playing with fire" on his current course. The IMF has increasingly become less pro-austerity as the European debt crisis has dug deeper.
Fair?Part of the problem for the UK is low interest rates, leaving the Chancellor very little room to energise growth. But several other European countries are in a similar straightjacket, as the Telegraph points out. For the time being, the Chancellor is unlikely to heed Lagarde's words.
Osborne has previously expressed admiration for Lagarde. "I believe Christine is the outstanding candidate for the IMF – and that's why Britain will back her," Osborne said when it came to replacing Dominique Strauss-Kahn in 2011, ensuring Gordon Brown was sidelined from any prospects of taking the top IMF post.
Interestingly, the IMF's role has also changed. Once broadly preoccupied with sorting out the finances of third-world countries overdosed with First World debt, runaway inflation and corruption. Now it is increasingly lending to the developed world, partly as a result of the huge imbalances of the global economy and financial market volatility.