European Union finance ministers and central bank governors were wrapping up a two-day informal meeting in France when Christine Lagarde, the French minister and host, offered a toast. It was Saturday, September 13, 2008, and although the economic outlook had deteriorated, the atmosphere was anything but gloomy. The officials discussed proposals for tighter banking supervision and agreed to adopt common reporting standards for EU financial institutions — in 2012. They also reviewed Slovakia’s progress toward joining the euro in three and a half months’ time.

“We ended up with a nice cocktail in Nice, and everybody went home,” the 57-year-old Lagarde recalls. “The following day the financial world collapsed.”

The failure of Lehman Brothers Holdings thrust Europe, and Lagarde, to center stage of the global financial crisis. The investment bank’s collapse sparked a worldwide financial panic and exposed Europe’s weaknesses — an undercapitalized banking sector and a monetary union without sufficient political backing — to the harsh judgments of globalized markets. Europe is still struggling to respond to the challenge. Lagarde, by contrast, has performed with aplomb, first as Finance minister, then, starting in 2011, as head of the International Monetary Fund.

At the Institute of International Finance’s October 11 dinner during the IMF’s 2008 annual meeting, Lagarde calmed a room of anxious bankers with her unscripted remarks. We know what’s at stake, andwe will do what’s necessary to save the financial system, she told the crowd, speaking on behalf of the Group of Seven countries, which France was chairing. When markets reopened two days later, the U.S. and EU nations announced plans to support their banks with hundreds of billions of dollars’ worth of recapitalizations, deposit guarantees and nationalizations. The following month the Group of 20 nations endorsed a detailed blueprint for financial reform — a major turning point in the crisis.

“The fact that the crisis involved and engulfed everybody at the time was decisive in bringing people together,” Lagarde says in an interview at her IMF office in Washington.

That sense of shared purpose has frayed to the breaking point since 2008. Whereas emerging-markets economies were quick to recover, the advanced economies have struggled to restore growth, and the euro area has flirted with disaster. Unconventional monetary policies by the Federal Reserve Board, the European Central Bank, the Bank of England and the Bank of Japan have unleashed volatile capital flows and raised talk of currency wars. The mere mention of the Fed’s tapering its bond purchases has sent emerging-markets currencies and asset prices tumbling. It may not feel like 2008 all over again, but risk is on the rise.