Europe will see a downward spiral of collapsing confidence if no further action is taken, said David Lipton, first deputy managing director at the International Monetary Fund, urging a pause in monetary tightening for countries in which inflation has eased.

Without ... action, Europe will be swept into a downward spiral of collapsing confidence, stagnant growth and fewer jobs, Lipton told the Fifth Asian Financial Forum in Hong Kong on Monday. But with decisive measures in Europe and global support for Europe, it is possible to avoid a new phase of the crisis.

Lipton urged countries in which inflation has eased to halt monetary tightening to bolster global economic growth, and said Asia should play a bigger role in the IMF.

In the event of further deterioration in the European crisis, no country or region would be immune, Lipton said, adding that Asia had a huge interest in seeing the problems in Europe resolved.

He said the U.S. economy had shown surprising signs of strength in the fourth quarter of last year, although ongoing disputes over U.S. budget problems remained an issue.

China's economy was being weighed down by slowing growth in the United States and the European Union, he said, but the possibility of a hard landing should be ruled out.

(Writing by Charlie Zhu; Editing by Chris Lewis)

China International Monetary Fund Inflation