Christine Lagarde said Europe's economic recovery had been “delayed, but not derailed” as she stressed the need for governments to pour on fiscal stimulus to ward off the impact of Covid.

The European Central Bank president told a panel at the virtual Davos event on Monday: "We are really looking at a phase one where it is still about crossing that bridge to recovery, but where the journey seems to be a little bit delayed but should not be derailed.”

Fiscal stimulus must play a “dominant” and “active” role in helping to prop up Europe’s economy while ever-stricter lockdowns continued, new strains of the virus emerged and uncertainty over production and distribution of vaccines remained, Ms Lagarde said.

The continent could then start to rebuild by focusing on investment into online activities which had thrived globally amid the pandemic, she said.

Speaking on the same panel, French finance minister Bruno Le Maire called for financial support to “remain very active since this is not the end of the pandemic” with many sectors still seeking help.

David Solomon, chief executive of Goldman Sachs, said: “We do need some more fiscal stimulus to continue to bridge the gap, move through this tunnel and get to the other side - there is still a huge level of uncertainty.”

The World Bank predicts that global GDP will contract by more than 5pc this year, with most countries falling into recession. Eurozone economies contracted at the end of last year and most countries are set for a double-dip recession.

Ms Lagarde doubled down on her pledge that the ECB would “continue to support all sectors of the economy” and ensure that financing conditions - like bank lending and bond yields - are “favourable”.

Last week she kept interest rates and quantitative easing on hold, but raised the prospect of more stimulus on top of the €1.8 trillion (£1.6 trillion) announced as part of the Pandemic Emergency Purchase Programme that was extended in December.

As the economy begins to reopen there must be targeted investment - supported by governments - in “a new economy which will be associated with positive developments” from the pandemic, said the former International Monetary Fund chief.

Inequalities in international digital taxation must be reduced, argued Mr Le Maire.

“The winners of the economic crisis are the digital giants. How can you explain to some sectors that have been severely hit ... that digital giants will not have to pay the same amount of taxes?” he said. “This is unfair and it is also inefficient from a financial point of view.”

Mr Le Maire said US Treasury Secretary Janet Yellen was open to the idea of an international digital taxation regime and that an agreement could be reached by the end of the year.

The comments came as the International Labour Organisation confirmed the massive impact of the pandemic on the global economy.

Its annual estimates showed 8.8pc of global working hours were lost for the whole of last year compared to the end of 2019 - the equivalent of 255m full-time jobs and four times bigger than the number lost during the global financial crisis.

The blow, which fell hardest on young workers and women, cost some $3.7 trillion in lost income, the ILO said.

Its director-general Guy Ryder called for continued monetary stimulus, and targeted support for poorer countries in rolling out vaccines: “The signs of recovery we see are encouraging, but they are fragile and highly uncertain, and we must remember that no country or group can recover alone.”