Fears of the debt crisis spreading, forcing the collapse of the euro and plunging the global economy into recession

Eurozone finance ministers have turned desperately to the IMF to help boost the firepower of their main bailout fund and prevent contagion from the sovereign debt crisis spreading to the core, forcing the collapse of the euro and plunging the global economy into recession.

But a six-hour meeting of the 17 ministers will almost certainly bring renewed fear and even panic on financial markets after they failed to call in the so-called "big bazooka" of unlimited European Central Bank purchases of sovereign debt from distressed countries. Jean-Claude Juncker, eurogroup chairman, made plain the ECB issue was "too sensitive."

Klaus Regling, chief executive of the bailout find, the EFSF, admitted he could not "put a number" on its increased firepower as the ministers tacitly admitted it could not reach the promised €1tn — and instead returned to contested moves at the G20 summit in Cannes to increase the IMF's lending power. Officials had earlier said the EFSF would only reach some €625bn compared with the current €250bn left.

The clear aim is to get the IMF to come to the EFSF's rescue even though Regling insisted there was still plenty of appetite among outside investors for participating in the fund. Officials insist that sovereign wealth funds in Asia and hedge funds are among those still keen to invest while ministers approved a plan for the EFSF to guarantee the first 20-30% of loans to countries in trouble.

However, after months of haggling over whether Athens had done enough to warrant the receipt of further support, the eurogroup decided to release the sixth tranche of the €110bn bailout for Greece — worth €8bn — after all political parties signed up for the latest austerity and reform package. The ministers also agreed that Ireland would get a further €8.5bn bailout in January — including €0.5bn from the UK.

It emerged that eurozone ministers and officials are, according to Jucker, to "rapidly explore an increase of the resources of the IMF so it can more adequately match the firepower of the EFSF."

The bailout find itself will be sub-divided into different tranches tailored to each country in distress and offering different maturities in order to make it more attractive to investors.

But earlier, ministers were warned that Italy's liquidity crisis could leave the eurozone's third biggest economy insolvent with devastating impact on the fate of the single currency and its big core economies, Germany and France. This came after Italy was forced to pay record interest rates to secure €7.5bn in new loans, with yields well above the 7% rate considered the threshold for in solvency but the auction for the bonds was over-subscribed.

Mario Monti, the new Italian prime minister and finance minister, won backing at the session for his austerity package aimed at saving Italy and shoring up the euro.

But a confidential report from the European Commission and the European Central Bank said Monti would need to do more than already pledged.

The report, obtained by The Guardian, said Monti had to go further in his promises to combat rampant tax evasion in Italy which is estimated to amount to 20% of gross domestic product.

"The sovereign debt crisis has now moved from the periphery to Italy and other core euro area countries. Pressure on Italian sovereign bond yields is particularly acute, reflecting investors' mounting concerns with the sustainability of Italy's large public debt" of almost two trillion euros, the report said.

"The risks of a full-blown sovereign liquidity crisis can increase rapidly in the absence of a determined policy response … Persistently high interest rates increase the risk of a self-fulfilling 'run' from Italy's sovereign debt. A liquidity crisis could then turn into a solvency crisis, whose repercussions for other large euro area countries would be very acute given their exposure to the Italian economy."

The leveraging scheme for the EFSF was drawn up by eurozone leaders at a summit a month ago. "It doesn'tlook like it will be [multiplied] 4-5 times," said a Brussels diplomat. "More like 2.5 times. That's probably not enough to restore confidence in Italy or Spain." This was a view repeated by the Dutch finance minister, Jan Kees de Jager.

Tuesday night's meeting came ahead of another crucial summit of EU leaders next week at which Germany and France, while still at odds over central details, will launch a drive for a eurozone "fiscal union", with governments required to forfeit national powers over fiscal, budget, tax and spending policies to a eurozone body. Angela Merkel, the German chancellor, is the biggest obstacle to any prompt and radical action aimed at stabilising the bond markets and ringfencing the euro.