IMF chief warns Greek debt crisis could spread

There are fears that Britain could follow Greece into a financial crisis after a global finance chief warned of economic "contagion" spreading across Europe.

The head of the International Monetary Fund urged politicians to finalise a bail-out for the debt-laden Mediterranean country, saying that every day lost in resolving the problems risked spreading the impact "far away".

Dominique Strauss-Kahn's comments come amid more evidence of Europe's mounting fiscal problems after Spain's debt was downgraded, a move recently applied to its under-pressure neighbour Portugal as well as Greece.

Shadow chancellor George Osborne has raised the spectre of the crisis affecting the public finances of the UK, which faces dealing with its own £163 billion mountain of public borrowing.

Speaking to the annual conference of the Institute of Directors on Wednesday about the need to deal with the record debt, he said: "If anyone doubts the dangers that face our country if we do not, they should look at what is happening today in Greece and in Portugal."

Economist Jonathan Loynes of Capital Economics added that Greece could be a "sovereign equivalent" of Lehman Brothers, which triggered a meltdown with its collapse in September 2008.

Germany is still holding out for more economic reforms from Greece before agreeing to an unprecedented multi-billion euro bail-out plan.

Chancellor Angela Merkel said she wanted to see more tough measures from Athens to put the brake on soaring deficit levels before making a final commitment.