The International Monetary Fund's policy-setting committee says the economy has entered a dangerous new phase. The panel says close watching of the situation and a willingness to take bold actions quickly are crucial.
Officials say they're encouraged by the willingness of the 17 nations that share the euro currency to do what's needed to resolve Europe's debt crisis.
They say the IMF stands ready to strongly support further efforts. The IMF is already providing bailout support to three heavily indebted European countries - Greece, Portugal and Ireland.
The IMF's statement doesn't give specifics on how much extra support might be possible.
Meanwhile, Europe is working on ways to boost the firepower of its bailout fund, a top European official said as the United States, China and other countries turned up pressure on the euro zone 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 euro zone countries, threatening the region's banks and hurting the world economy.
The European official said on Saturday the euro zone countries cannot boost the size of the 440 billion-euro fund, known as the EFSF, 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 United States and other countries have urged Europe to leverage up the European Financial Stability Facility, possibly by using funds from the European Central Bank.
In a statement, the International Monetary Fund's steering committee said the euro zone 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," Geithner told the IMF.
Financial markets have been wracked by fears the Greek debt crisis could overwhelm other euro zone countries and banks.
Investors took some comfort on Friday from signs of new resolve by European officials to bolster their defenses 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.
"Decisions as to how to conclusively address the region's problems cannot wait until the crisis gets more severe," Geithner said.
His warning was echoed by China's central bank Gov. Zhou Xiaochuan, who urged quick action to bring greater financial stability to the European region.
"The sovereign debt crisis in the euro area needs to be resolved promptly to stabilize market confidence, and forceful and credible fiscal consolidation measures are needed in relevant economies to alleviate sovereign debt stress," Zhou told the IMF.
The semi-annual gathering of the IMF and World Bank is dominated by worry about the risk that Europe now poses to the rest of the world.
A default by Greece could cause a domino effect in other highly indebted euro zone countries, officials fear, putting at risk Europe's banking system given the size of holdings of debt issued by weak European nations.
Canada's central bank governor, Mark Carney, told Canadian radio that the euro area's bailout fund should be more than doubled to "the neighborhood of a trillion euros."
Greek finance minister Evangelos Venizelos told reporters that Athens was determined not to default. "Greece is determined to honor all its obligations. No Greek paper will ever go uncovered."
Geithner wants more cooperation among European policymakers — who set their own tax and fiscal policy — and their central bank that is mandated to focus on keeping inflation low.
"European governments should work alongside the ECB to demonstrate an unequivocal commitment to ensure sovereigns with sound fiscal policies have affordable financing, and to ensure that European banks have recourse to adequate capital and funding to win the full confidence of their depositors and creditors," Geithner said.
In another sign of Europe considering new measures to tackle the crisis, a senior lawmaker from German Chancellor Angela Merkel's conservatives said the euro zone's permanent rescue mechanism should be introduced sooner than mid-2013 to beef up private creditors' response to the Greek debt crisis.
But in a reminder of how sensitive some European officials are to the ECB taking a more active role in the crisis, a board member of Germany's central bank, the Bundesbank, suggested the time was coming for the ECB to stop buying government bonds.
"I think the time is coming for this to stop," said Joachim Nagel, adding that the ECB's bond buying was only supposed to be a temporary measure until the euro zone's bailout fund is beefed up with powers to buy bonds and lend to governments.
Another top ECB official sought to quash growing expectations that Greece will eventually default.
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 8 billion-euro installment of its rescue package.
In return, Athens has pledged deep austerity measures but negotiators are frustrated at what they say is Greece's slow reform pace. October's loan payment, however, is still widely expected to be made. The next installment is due in December.
Germany, as the strongest economy in Europe, plays a central role in any effort to curb a debt crisis but public opinion there has turned against further big bailouts for fellow euro zone countries.
Finance Minister Wolfgang Schaeuble said on Saturday he will meet Venizelos, while in Washington for the IMF meetings.
"We are permanently in contact and talk a lot," Schaeuble said, a day after Merkel said a Greek default was not an option for her.
