Greek debt crisis puts entire eurozone at risk, warns IMF

The head of the International Monetary Fund, Dominique Strauss-Kahn, has warned that confidence in the eurozone is at risk after Spain's credit rating was downgraded and pressure mounted to agree a bailout deal for Greece that could reach €120 billion.

Reuters

Strauss-Kahn made the comments in Berlin as he tried to persuade Germany, Europe's biggest economy, to back the terms of a multi-billion dollar rescue package, arguing Greece's debt crisis could spread and threaten the economies of other countries.

Greek Prime Minister, George Papandreou, said the European Union "must prevent a fire" from engulfing the European and world economy.

But Germany has said it will lend Greece the money it needs to avoid a crippling default only if Athens promises further budget cuts.

US President Barack Obama called German Chancellor Angela Merkel on Wednesday, with both leaders stressing the need for "resolute action" to tackle Greece's debt crisis, the White House said.

"They discussed the importance of resolute action by Greece and timely support from the IMF and Europe to address Greece's economic difficulties," it said.

Strauss-Kahn travelled to Berlin with European Central Bank president Jean-Claude Trichet to drum up support for an EU-IMF aid plan for Greece, in which Germany would pay the lion's share.

"It is perfectly clear that the negotiations with the Greek government, the European Commission and the IMF need to be accelerated," Merkel said after meeting with Strauss-Kahn.

"We hope they can be wrapped up in the coming days and on the basis of this, Germany will make its decisions."