01/28/2012 02:50 EST | Updated 03/29/2012 05:12 EDT

European austerity measures could be 'grave' for world

As the head of the International Monetary Fund warned European leaders not to cut “across the board,” Canada’s former finance minister John Manley spoke of fears of a downward spiral for the global economy.

Christine Lagarde, managing director of the IMF, spoke in Davos, Switzerland on Saturday at the annual World Economic Forum where government and business leaders gathered to discuss the ailing economies of Europe.

Manley, now the head of the Canadian Council of Chief Executives, told CBC News on Saturday that he agrees with Lagarde.

“When you scratch below the surface a bit and get a sense of how difficult some of those choices are going to be [in the] Eurozone … the impact that could have on global growth, it’s very grave,” he said.

Lagarde said European leaders shouldn’t come up with the same austerity programs as their neighbours, but tailor them to suit individual economies.

"Some countries have to go full-speed ahead to do this fiscal consolidation, but other countries have space and room,” noted Lagarde. “They should explore what to do ... in order to help themselves.”

While Greece and Spain have gone deep with government spending cuts and raising taxes in order to try to bring down their deficits, other countries, such as Germany, are following suit, even though they have relatively healthy economies.

Lagarde is worried that severe widespread cuts could bring the world's markets down, and so is Manley.

“We are not in one of those economies where things are faltering. Our unemployment rate is relatively low, so like everywhere, good news is not necessarily news,” said Manley about where Canada stands.

“All of the official speakers here this week have more or less said things, like, we know what has to be done, we have a consensus on how to go about doing it, this is going to be a year when there isn’t strong growth. I think below the surface there are grave concerns things could get a lot worse.”

Over at the IMF, Lagarde is trying to bolster her organization’s resources by $500 billion US, in order to offer a helping hand to some of the worse-hit economies.

Lagarde pleaded to the gathered leaders that expanding the size of the IMF's resources would help improve confidence in the global financial system.

"It's for that reason that I am here, with my little bag, to collect a bit of money," she said.

Lagarde's plea seemed to have captured the ears of the ministers from Britain and Japan, sizable IMF shareholders.

George Osborne, Britain's finance minister, said he would be willing to head back to Parliament to pledge his case for more money for the IMF.

And Japan's economic minister, Motohisa Furukawa, said his country would be willing to help the eurozone through the IMF.

On Thursday, Canadian Prime Minister Stephen Harper wagged a finger at his European counterparts, urging them to institute hard reforms and accusing them of being complacent about their wealth.

He said Western nations have to decide to pursue economic growth, or risk declining fortunes.

"Easy choices now mean fewer choices later," Harper told the 2,600 delegates.