The Head of the International Monetary Fund, IMF, Dominique Strauss-Kahn has warned that he sees the European debt crisis as the main risk to global economic recovery. He acknowledged that Europe is a potential problem to economic outlook, but insisted there was no threat to the euro system itself. The IMF has also raised fresh concerns about Spain's economy, saying far-reaching reforms are needed to ensure its recovery. It said the country faced severe challenges, including the need to urgently reform a dysfunctional labour market, and its banking sector.The IMF's comments came after Spanish authorities had to rescue regional lender Cajasur at the weekend. Last week, Spain's government passed austerity measures to cut its deficit.The Italian Government meanwhile has approved a 29 billion dollar package of cuts to reduce the country's budget deficit. The measures include pay freezes of civil servants and lower health spending. The move follows the lead of Greece, Spain and Portugal.Meanwhile, US markets ended steady yesterday despite torrid trading. Shares in New York ended all but flat , despite falls of some 3% earlier in the session. The Dow Jones closed barely changed – down 0.2% at 10,043 as nerves stabilised towards the end of the session. Earlier, European stock markets closed sharply lower after a day of continued fears about eurozone debt problems. In London, the FTSE 100 has now fallen by more than 10% in little more than a month after hitting a 22-month high in April – it stands at its lowest level since 7 September 2009.Asian markets also saw sharp falls. As well as eurozone worries, stocks in South Korea and Japan had been affected as North Korea reportedly went on to military alert. North Korea later announced it was severing ties with South Korea.