LONDON, England - December 15, 2011 - The world risks sliding into a 1930s-style Depression unless countries settle their differences and work together to tackle Europe's deepening debt crisis, the head of the International Monetary Fund has warned.

On a day that saw an escalation in the tit-for-tat trade battle between China and the United States and a deepening of the diplomatic rift between Britain and France, Christine Lagarde issued her strongest warning yet about the health of the global economy and said if the international community failed to cooperate the risk was of "retraction, rising protectionism, isolation".

She added, "This is exactly the description of what happened in the 1930s, and what followed is not something we are looking forward to."

The IMF managing director's call came amid growing concern that 2012 will see Europe slide further into Depression, with knock-on effects for the rest of the global economy.

"The world economic outlook at the moment is not particularly rosy. It is quite gloomy," said Lagarde.