The European Central Bank (ECB) has stepped up pressure for a joint guarantee on bank deposits across the eurozone, stressing that Europe needs new tools to fight the bloc’s debt crisis.

ECB notes that the financial instability drives investors to flee risk.

Also the European Commission’s top economic official, Olli Rehn, has warned that the single currency block could indeed collapse without stronger crisis-fighting mechanisms and tougher fiscal discipline.

The warnings came after the problems of Spain’s banks and Greece pushed the euro to a two-year low against the dollar.

It also hastened a rush into safe-haven assets such as Austrian and French bonds.

The chief of the International Monetary Fund Christine Lagarde is said to have met Spain’s deputy prime minister to discuss contingency plans for a Spanish bailout.

However, the IMF dismisses such information, saying, “There is no such plan. We have not received any request to that effect and we are not doing any work in relation to any financial support.”

As reported, Germany has refused to share the debt burden with stressed eurozone member states, thus ignoring two of the most influential international economic bodies’ standpoint.

The International Monetary Fund and the Organisation for Economic Co-operation and Development had already offered support for proposals made by Paris, Rome and Brussels.

However, the German Chancellor Angela Merkel argues that co-mingling of eurozone debt would remove any incentives for southern European economies to carry out structural reforms.