German Chancellor Angela Merkel Warns of Financial Contagion in Euro Zone

German Chancellor Angela Merkel and the head of the IMF warned of financial contagion on Wednesday unless a euro zone debt crisis is stopped in Greece, while investors fled to the safe havens of the dollar and gold.

Photo: German Chancellor Angela Merkel Warns of Financial Contagion in Euro Zone

Greek public and private sector workers shut down airports, tourist sites and public services in a general strike against harsher austerity, accepted by the government as the price for a 110 billion euro ($146.5 billion) EU/IMF bailout on Sunday.

Merkel told parliament Europe's fate was at stake in the most serious crisis in the single currency's 11-year lifetime, and other euro zone countries could suffer the same fate as Greece unless the international rescue succeeds, Reuters informs.

According to CNBC.com, the euro sank to a fresh one-year low against the dollar amid fears of a wider euro zone sovereign debt crisis. Euro-selling took the currency to US$1.2936 this session, adding to Tuesday's 1.5 percent fall.

The single currency also fell to its lowest against sterling in nearly nine months, to 85.54 pence.

Investors remained doubtful the 110-billion euro bailout for debt-laden Greece would work and worried that the problem could spread to other economies such as Spain and Portugal.