Global markets tumble as IMF warns on Greek contagion

"There is always a risk [of contagion spreading]," said Mr Strauss-Kahn in an interview published in Wednesday's (5 May) edition of Le Parisien. "Everyone must remain extremely vigilant."

The head of the Washington-based lending organisation noted that Portugal had already begun to take additional measures to reduce its deficit however, and said countries such as France and Germany were in a much stronger position.

Greek, Portuguese and Spanish bonds also suffered losses on Tuesday, with Spanish Prime Minister Jose Luis Rodriguez Zapatero forced to deny his government was seeking an aid package similar to that recently granted to Greece.

The Socialist politician brushed off market rumours that Spain was in the process of negotiating a €280 billion rescue package as "complete insanity," with a spokesman for the IMF also saying the reports are unfounded.

Greece's debt crisis has meanwhile affected emerging markets across the Atlantic, as investors dumped riskier assets and sought safe-haven in the US dollar. Mexico's peso slumped to a five-week low. Argentine bonds and stocks also declined.

Opposition mounting in Europe

In Europe there were signs that opposition is mounting to Greece's €110 billion three-year loan, recently agreed by euro area finance ministers and the IMF.

Greek citizens took to the streets on Tuesday to protest against the harsh package of austerity measures that will accompany the aid, with the country expected to grind to a halt on Wednesday as transport workers join the 48-hour strike.

In Athens, the Greek parliament is due to vote on the list of spending cuts and tax hikes later this week, as the government scrambles to show European partners and investors that it is capable of reducing its deficit to below three percent of GDP by 2014, after recent EU data showed it hit 13.6 percent in 2009.

The Dutch parliament is set to debate legislation paving the way for its contribution to the Greek loan on Wednesday, with Berlin hoping to seek similar approval on Friday.

However a group of German professors say they will file a lawsuit with the constitutional court if parliament passes legislation enabling Berlin to transfer its €22.4 billion share of the Greek bail-out.

Opposition has also surfaced in Slovakia, where a majority of political parties are against helping Athens.

Meanwhile, Slovenia has indicated it will need to take out a special loan of its own in order to help its debt-ridden European partner. "Slovenia will gather the resources needed through a bond issue or a loan on the international market and lend it to Greece at a one-percent-higher interest rate," the country's finance minister, Franc Krizanic, told national television.