IMF talks deliver new euro zone crisis plan

European policymakers are debating a dramatic increase in the size of continent's $594m bailout fund, amid pressure from the United States and China.

Reports from the International Monetary Fund (IMF) in Washington suggest that the outline of what the BBC has termed “a large and ambitious euro zone rescue plan” is taking shape.

The news comes after talks in Washington over the weekend between the G20 leaders, the World Bank and the IMF.

Europe has been told that it must get more aggressive in its crisis response, and so policymakers began working on new ways to stop fallout from Greece's debt crisis from further hurting the world economy.

The BBC reports that the plan is expected to involve a 50 percent write-down of Greece's huge government debt, while increasing the size of the euro zone bailout fund to $2.7 trillion.

This is how the BBC describes the mechanics of the plan:

The package is expected to involve a quadrupling – from the current projected level of 440bn euros – in the firepower of Europe's main bailout fund, the European Financial Stability Facility (EFSF).

This would be done by putting in place an arrangement that would allow the European Central Bank (ECB) to lend alongside the fund.

The EFSF would take on the main risk of lending to governments struggling to borrow from normal commercial sources – governments like Italy.

In this way, the EFSF would make it less dangerous for the ECB to lend.

It is understood that European governments hope to have the plan ready in five to six weeks.

Concerns about the ability of Europe to get a hold on the crisis caused financial markets to plunge on Monday.

France's Cac 40 lost 2 percent in early trading, while the UK's FTSE 100 and Germany's Dax fell about 1 percent. Asian shares also took a hit: Japan's Nikkei was down 2.2 percent, Hong Kong's Hang Seng 2.4 percent and South Korea's Kospi 2.6 percent.

A senior IMF official said Sunday that the ECB was the only player big enough to "scare" financial markets, putting further pressure on Europe, reported Al Jazeera.

There are differences in opinion over whether the ECB should commit more of its resources to helping euro zone countries and securing European banks.