The International Monetary Fund (IMF) has expressed its growing concern about the deepening crisis in Greece, stressing that a failure by the European Union to take decisive action could lead to a domino effect through the single-currency zone and result in a second global financial meltdown.

In its starkest warning yet that Greece has the potential to replicate the system-wide shock triggered by the collapse of Lehman Brothers in September 2008, the IMF told Europe's policymakers to stop squabbling over the terms of a bailout and act immediately to prevent contagion.

"While courageous attempts have been made to address the crisis, policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome," the fund said in its annual health check on the eurozone.

"With deeply intertwined fiscal and financial problems, failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers."

The warning from the IMF was issued by acting managing director John Lipsky, who has been in charge since the resignation of Dominique Strauss-Kahn last month. It came as Europe's finance ministers said the price of a fresh €12bn (£10.5bn) bridging loan to Greece was agreement by the parliament in Athens to fresh austerity measures. George Papandreou, the Greek prime minister, is currently trying to secure agreement for a package of measures that would involve deep wage cuts and sweeping privatisation.

A team of officials from the IMF has been studying the eurozone economy and concluded that continued financial support for Greece from the other 16 members of the single currency was needed.

It said a "more cohesive and co-operative approach is needed to manage the crisis in the periphery" – the group of nations including Greece, Ireland and Portugal that have needed financial help from the IMF and the EU over the past year. The IMF fears that without decisive action there is a risk of the crisis spreading to other heavily indebted eurozone countries such as Spain and Italy.

Despite strong opposition to the austerity measures imposed as a condition of bailout funds, the IMF said it was vital that Greece and the other struggling nations embrace deep structural reform. "Crucial is a determined commitment to adjustment in the programme countries, including immediate and far-reaching structural reforms and an ambitious drive to open up the economy to foreign competition and foreign ownership along programme commitments. Privatisation will contribute to these objectives beyond helping to establish debt sustainability."

The fund added: "Rapid implementation of the commitment to scale up the European financial stability facility and a further extension of its potential uses would sent a much needed signal that member countries 'will do whatever it takes to safeguard the stability of the euro area'. In this context, it will be essential to bring the unproductive debate about debt reprofiling or restructuring to closure quickly, and avoid and impression that the European stability mechanism will be conditional on debt restructuring."

In its report, the IMF said the sovereign debt crisis threatened the "broadly sound" recovery in the euro area, adding that "much remains to be done to secure a dynamic and resilient monetary union".

The IMF also said: "A strong core is pulling ahead of a periphery facing daunting challenges, with very high debt levels, severe competitiveness problems, and fragile banking systems. Strong policy action by national authorities is a prerequisite, but should be backed by a truly cohesive approach from all euro area stakeholders."