By Ambrose Evans-Pritchard 8:56PM BST 24 Sep 2012 “The IMF is evolving from a liquidity mechanism into a bank. This is neither in keeping with the legal and institutional role of the IMF or with its ability to handle risks,” said the Bundesbank in its monthly report. The bank said the Fund was right to help rescue Greece, Ireland and Portugal but said monitoring levels were slipping and there had been a “watering down” of standards. The scale of loans risks “overwhelming the IMF’s institutional structure”. The unprecedented attack came as the IMF’s chief, Christine Lagarde, called for urgent measures across the world to head off a fresh global slump. While praising the latest emergency measures of central banks in the US, Europe and Japan, she said this was not enough to secure recovery. The Europeans must activate their new machinery, while the US must prevent a “dramatic tightening” of fiscal policy later this year. Failure to act “would effectively plunge the country off a 'fiscal cliff'", cutting US growth by up to 2pc. She said this would pose a “serious threat for the global economy”. Ms Lagarde also said emerging economies need to bolster their defences against “potential spill-overs”, if necessary by injecting “additional stimulus”. The Bundesbank’s broadside against the Fund caused consternation in Washington, where Asian and Latin American members of the Board think the IMF has been doing Germany’s work for it, shouldering too much of the risk trying to hold the eurozone together. There is irritation in IMF circles over the way the Fund has been dragged into badly-constructed rescue packages. The Fund has refused to lend any more money to Greece, saying the country cannot regain economic viability unless EU bodies take losses. Ms Lagarde’s Keynesian team is deeply at odds with Germany’s hard-money hawks. A leaked memo from Germany’s finance ministry previously called the IMF the “Inflation Maximizing Fund” after it suggested that a burst of inflation might lift the world off the reefs. Germany has weathered the slump so far but there are signs that extreme austerity and deepening slump across southern Europe has begun to engulf the country. Germany’s IFO business confidence index has fallen for the past five months, sinking this month to its lowest since mid-2009. Capital Economics said the crash in the manufacturing expectations index points to a 10pc fall in industrial output. “It is only a matter of time before the economy starts to contract," it said. The OECD expects a “light recession” in Germany, with grave knock-on effects for struggling EMU states relying on the German locomotive to pull them along. Separately, EU diplomats said a taskforce is working on plans to boost the European Stability Mechanism (ESM) or bail-out fund from €500bn to €2 trillion by offering guarantees to private creditors to co-invest. The package should be ready by early November. While it has support from Germany’s government, it may face trouble in the Bundestag and Finland’s parliament since it exposes taxpayers to bigger losses in any default. “We always find a solution in the end,” said one official.