The leaders of the world's top economic powers forced Europe on Friday to take measures to stop Italy following Greece into the abyss of debt and agreed to boost the IMF's war chest.
Amid pressure from the United States and emerging nations at the G20 summit in the French resort of Cannes, Italy accepted a humiliating deal to put its economy under international surveillance, although it rejected financial aid.
Leaders also said they would find extra cash for the International Monetary Fund to help it tackle the European debt crisis, and agreed on measures to protect and nurture fragile global growth.
But there was no let-up in pressure on debt-laden Greece, whose ongoing political and economic crisis still hung heavily over Cannes' rain-lashed seafront summit venue, as an example of the threat facing Italy.
After intense pressure on Italian Prime Minister Silvio Berlusconi, Rome agreed to surveillance on its budgetary reforms from the EU's executive commision and the International Monetary Fund.
Investors jittery that Italy, also heavily indebted and with sluggish growth, could follow Greece have sent Rome's borrowing costs to unsustainable levels and sent the risk spread on its bonds to record levels.
Italian Prime Minister Silvio Berlusconi confirmed Italy had asked for the IMF to monitor its economic reforms, but said that he had turned down an offer of financial aid as it "wasn't necessary".
European Commission chief Manuel Barroso hailed the move as "important, not only for the euro area but for global stability," arguing that it improves the credibility of its efforts to eliminate its budget deficit.
A team from the Commission, which will also step up its monitoring of Italy, will travel to Rome next week, he added.
Italy had earlier bridled at the claim, insisting its measures were being monitored by the commission with Rome seeking only "advice" from the IMF.
European Union president Herman van Rompuy insisted however that Europe Italy had not "put Italy into a corner", saying the discussions were held in a "serene atmosphere, not in an atmosphere of diktat."
In Athens, Prime Minister George Papandreou, who was summoned to Cannes for a dressing down by host President Nicolas Sarkozy and Germany's Chancellor Angela Merkel on Wednesday, faces a vote of confidence on Friday.
Whatever the result, his eurozone partners have made it clear that either he or his successor will have to push through a bail-out deal tied to tight fiscal controls decided last week in Europe but now called into question.
EU leaders warned that Greece would not get the next planned eight-billion euro ($11 billion) aid installment from the IMF and EU unless the deal went through, and threatened to boot Athens out of the Union if it defaults.
Without the EU-IMF funds, Greece would run out of money within weeks, and the roller-coaster political situation and debt crisis in Athens have in turn boosted market pressure on the Italian budget.
With the eurozone debt crisis threatening to slash growth worldwide, G20 leaders pledged to coordinate their economic policies in an action plan on growth on jobs.
"Countries with large current account surpluses commit to reforms to increase domestic demand, coupled with greater exchange rate flexibility," said the final communique.
Should economic conditions worsen, they agreed to take additional measures to boost domestic demand.
Debt-laden countries agreed to implement "clear, credible and specific measures to achieve fiscal consolidation."
G20 leaders also pledged to ensure that the International Monetary Fund, which has $400 billion left at its disposal, has sufficient funds to respond to possible crisis and tasked finance ministers to come up with options.
They also approved measures to strengthen the international financial system by requiring the 29 banks judged too important to fail to increase their buffers to absorb potential losses.
