Europe is working on ways to boost the firepower of its bailout fund, a top European official has said as the US, China and other countries turned up pressure on the eurozone to contain its debt crisis.
Signs are growing that Europe is readying new measures to prevent fallout from Greece's near-bankruptcy from spreading to other eurozone countries, threatening the region's banks and hurting the world economy.
However the official said the eurozone countries cannot boost the size of the €440bn fund, known as the European Financial Stability Facility, because Germany would not agree to such an increase.
"We need to find a mechanism where we can turn one euro in the EFSF into five, but there is no decision on how we could do that yet" the official said, speaking on condition of anonymity.
The US and other countries have urged Europe to leverage up the EFSF, possibly by using funds from the European Central Bank.
In a statement, the International Monetary Fund's steering committee said the eurozone would do whatever was necessary to resolve the single currency bloc's sovereign debt crisis.
US Treasury chief Timothy Geithner, in his most explicit warnings to date, said the ECB should take a more central role in fighting the crisis.
"The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally," Mr Geithner told the IMF.
Financial markets have been wracked by fears the Greek debt crisis could overwhelm other eurozone countries and banks.
Investors took some comfort yesterday from signs of new resolve by European officials to bolster their defences after nearly two years of what many see as half-hearted action.
Many policymakers now talk openly of possible Greek default and the need for Europe to move much more aggressively to cope with it.
However, officials fear a default by Greece could cause a domino effect in other highly indebted eurozone countries, putting at risk Europe's banking system given the size of holdings of debt issued by weak European nations.
ECB Governing Council member Athanasios Orphanides said the idea of a Greek default was "surreal" but warned that it could occur as the result of a "political accident."
Greece is in tense talks with the IMF and European authorities to secure a new €8bn instalment of its rescue package.
IMF would not have finances for potential crisis
Meanwhile, the IMF's financial resources would not be enough to meet potential crisis needs, according to its chief Christine Lagarde.
"Our lending capacity of almost $400bn looks comfortable today but pales in comparison with the potential financing needs of vulnerable countries and crisis bystanders," Ms Lagarde said.
"It will be useful to discuss, soon, the needs and contingency options," the managing director said in an action plan for the 187-nation institution unveiled at IMF and World Bank meetings in Washington.
"We must be prepared to respond rapidly, flexibly and possibly on a larger scale," she said.
With risks rising to global growth, a new economic shock could occur that hits countries hard, particularly the poorest countries.
