The Group of 20 nations on Friday pledged $430 billion in new funding to the International Monetary Fund, more than doubling its lending power in a bid to protect the global economy from the euro-zone debt crisis.
The promised funds from advanced and emerging economies will provide the global lender with a huge war chest should the sovereign debt problems that have engulfed three euro zone countries spread and threaten a fragile recovery.
"This is extremely important, necessary, an expression of collective resolve," she said.
"Given the increase that has just taken place, we are north of a trillion dollars actually. So I was a bit mesmerized by the amount," said Lagarde.
The $1 trillion figure included both the IMF's existing and newly pledged resources, as well as loans already committed.
The IMF would be able to use its increased firepower to help any country or region in need. But Europe's crisis was the driving force behind the push for more funding. Greece, Ireland and Portugal have already received bailouts. Investors now are worried that Italy and Spain, the euro zone's third and fourth biggest economies, will fail to bring down their debt burdens quickly enough to satisfy financial markets.
Worries about the euro zone's debt crisis have dominated talks among finance officials in Washington this week for the semiannual meetings of the IMF and the World Bank. The IMF has warned the crisis presents the gravest risk to the global economic expansion.
In a reminder of the financial stress, 10-year government bond yields in Spain topped 6 percent for the third time this week. Rising yields reflect investors' demand for higher returns to compensate for perceived increases in risk, and there are fears that Spain's borrowing costs will become unaffordable.
Financial market participants welcomed the move, but warned that it does not solve the problems of Europe's debt-plagued nations.
"Having an extra G-20 commitment to the IMF is still a number of steps removed from Spain and Italy being able to meet the markets day in and day out and raise money," said Robert Tipp, chief investment strategist with Prudential Fixed Income in Newark, New Jersey.
"During the Lehman crisis, a real turning point was when the G20 unconditionally guaranteed the Libor market," he added, referring to the London interbank offered rate, the benchmark for a vast amount of lending worldwide. "That stopped trend widening trends. And the economic situation has become more dire. There are more countries in recession, which increases the odds of them missing their targets."
The G20 on Friday warned that clouds still loom over the outlook for the global economy.
"The tail risks facing the global economy only months ago have started to recede," the G20 said after a meeting. "However, growth expectations for 2012 remain moderate, deleveraging is constraining consumption and investment growth, volatility remains high partly reflecting financial market pressures in Europe and downside risks still persist."
Emerging markets won assurances from their G20 partners that their growing economic clout would be rewarded over time with greater voting power in the IMF. Brazil, in particular, had pushed for such a pledge.
Brazilian Finance Minister Guido Mantega said after the G20 meeting that the BRICS group of leading emerging nations - which also includes Russia, India, China and South Africa - had unanimously agreed to provide more money for the IMF.