The International Monetary Fund says the eurozone's debt crisis has reached a “critical stage,” and that European leaders need to move quickly toward greater financial unity.

The IMF's executive board said Wednesday that the 17-nation currency union needs to adopt a cross-border banking union, guaranteeing deposits and imposing central financial controls.

The Washington-based lending agency said there are “severe downside risks” in the eurozone outlook, with regional and global implications. It said investors are favoring more financially stable northern countries in the eurozone, to the detriment of its debt-ridden countries to the south, such as Greece and Spain.

The IMF's conclusion was on display in Frankfurt, where investors for the first time paid to lend money to Germany. Berlin heads the eurozone's most robust economy and investors view German bonds as a safe haven for their money.

Meanwhile, Spanish economic fortunes continued to decline, with bad loans increasing for the 14th month in a row. Prime Minister Mariano Rajoy told parliament that his $80 billion austerity plan would not immediately boost economic growth.

He said the country had no good economic choices, only a choice “between the bad and even worse.”

In Greece, political leaders from the three parties leading the coalition government worked toward an agreement on how to impose $14 billion in austerity measures so Athens can collect the next installment of its international bailout.

Democratic Left party leader Fotis Kouvelis said reforms promised to the country's international creditors would be carried out.

“We agreed that structural reforms must take place without delay, structural reforms that will serve the good of the state and to make the best use of state wealth.”