The United States needs a balanced, comprehensive approach to deal with the impending " fiscal cliff", a combination of automatic spending cuts and tax hikes to take effect in January, the head of the International Monetary Fund (IMF) said on Sunday.
Christine Lagarde, the managing director of the IMF talked in an interview with CNN about her view on the "fiscal cliff" and the consequences if Congress fails to reach an agreement before the deadline.
"My view, personally, is that the best way to go forward is to have a balanced approach that takes into account both increasing the revenue, which means, you know, either raising taxes or creating new sources of revenue, and cutting spending," Lagarde said in the pre-taped interview aired on Sunday.
She said the fiscal woes are now the biggest threat to the U.S. economy which is less vulnerable to what happens outside, in Europe for instance.
"It is more exposed to its own difficulties and to its own issues, than to what happens elsewhere in the world, because it is such a large player."
Lagarde predicted the immediate aftermath of falling off the " fiscal cliff" would be "lack of confidence" and the markets would react very quickly.
She told CNN that a comprehensive plan for the fiscal issues is better than a quick fix and she remains hopeful that the lawmakers would negotiate a way to tackle them.
"I believe that there is a sense of being practical, addressing the issues, rather than dancing around and avoiding issues that I have seen in this country," she said.
As "fiscal cliff" nears, Obama administration and congressional leaders are trying to come up with a plan to avoid it. Failure to do so could tip the U.S. economy back into recession.