By Christiaan Hetzner and Edward Taylor
FRANKFURT (Reuters) - The International Monetary Fund urged broad-based action to combat the euro zone debt crisis, saying it was ready to give Greece more aid and asking the European Central Bank to tread carefully in hiking interest rates.
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In its economic outlook for Europe, the fund said "unrelenting" reform efforts from Greece and other euro zone periphery states were the first line of defense against contagion, which remained "a tangible downside risk."
The ECB could also play its part by holding off from aggressive interest rate rises. The Frankfurt-based central bank raised euro zone rates for the first time in almost three years last month -- putting more pressure on debt servicing costs -- and economists see two further hikes before the end of the year.
The IMF also said the ongoing troubles in the euro zone may require the ECB to prolong its crisis tactic of providing limit-free liquidity to the region's banks.
Greek banks and lenders in other high-debt member states remain heavily reliant on the ECB's funding lifelines with access to normal bank-to-bank lending markets currently impossible due to bankruptcy fears.
With Greece's still struggling to get its debts under control, markets have all but written off its chances of being able to access bond markets as a sovereign borrower in 2012 as the IMF/EU program originally envisaged.
The fund's European Department Director, Antonio Borges, said no talks were currently taking place on a new aid package and if Greece wanted more support from the IMF it would have to take the initiative.
"So far they have not approached us. The IMF stands ready (to provide additional support) as a matter of policy," he told reporters.
"Whether Greece will need more time, whether another program is necessary is something that the Greeks themselves have to decide."
The austerity-dependent program for Greece was "probably the best thing that can happen" to the country, though there was always the question of whether it was too ambitious, Borges said.
"We want the current program to succeed...The future of the current program is number one dependent on the Greek government. They have to remain committed to it and continue implementing it."
"And then we have to find in the next couple of years the appropriate financing," he said.
Ireland and Greece are already dependent on 52.5 billion euros of IMF aid while Portugal is awaiting a 26-billion-euro three-year lifeline from the IMF.
Borges said the IMF believed that Greece was not bankrupt despite its high debts.
"All IMF programs are based on debt sustainability, so as long as a program is in place that means that the IMF believes Greek debt is sustainable," he said.
(Reporting by Christiaan Hetzner; writing by Marc Jones and John Stonestreet; Editing by Toby Chopra)