MARK COLVIN: The International Monetary Fund says the world economy is in danger of another 1930s crash.

It would see countries defaulting on their debt and widespread panic on global financial markets.

The IMF forecast came after European finance ministers failed to reach a debt restructuring agreement with private bond holders in Greece last night.

As David Taylor reports there are now just weeks remaining before Greece's economy reaches the point of no return.

DAVID TAYLOR: European finance leaders are running out of time. Last night saw yet another failure of European ministers to negotiate a plan to keep private bond holders at bay.

Key figures from the leadership team commissioned to solve the crisis are no longer shy about where they see things are headed.

CHRISTINE LAGARDE: We could easily, easily, slide into what we call a 1930s moment. A moment where trust and cooperation break down and countries turn inward. A moment ultimately leading to a downward spiral that could very much engulf the entire world.

DAVID TAYLOR: International Monetary Fund managing director Christine Lagarde.

But they're not giving up without a fight.

CHRISTINE LAGARDE: I believe that we can avoid such a scenario. I say this for a simple reason; because we know what must be done.

DAVID TAYLOR: That includes increasing the size of the massive European bailout fund and imposing fire walls around the more robust European economies to prevent financial contagion, a financial contagion that could eventuate if Greece suffers a disorderly default on its debt.

At this point, that's exactly where we are headed.

Last night a group representing private Greek investors met with finance ministers to negotiate new terms for their holdings.

The authorities need the investors to accept some pretty dismal returns on their investments, huge losses to be exact. Understandably they're reluctant to do that but they may have no choice.

Russell Jones is the global head of fixed income strategy at the Westpac Bank.

RUSSELL JONES: To allow that to happen you have to have an interest rate which is comfortable for them. If it's too high, quite simply they will default on their bonds, they won't pay anybody back anything and that's not what the authorities want.

DAVID TAYLOR: But as investors walked away from the negotiating table last night, they increased the chance they'll receive absolutely nothing. That's because Greece is unlikely to receive any more aid money if it's unable to strike a deal with those debt investors. That would leave Greece facing complete financial collapse by the end of March.

RUSSELL JONES: There has to be something done by around the third week in March because at that stage the Greeks have got a very large payment that they have to make.

So that is the absolute deadline for any negotiations on this issue. And clearly they would like to have something in place somewhere before that if they possibly could.

DAVID TAYLOR: And if they don't meet that deadline Greece defaults?

RUSSELL JONES: Greece defaults and not in an orderly way, in a very disorderly way. And the danger with that is it sparks another round of very bad contagion to other countries in the euro zone. They get tarred with the same sort of brush as Greece. It could be a very, very difficult period for financial markets.

DAVID TAYLOR: Fact is strategists at this point are genuinely uncertain about what lies ahead.

RUSSELL JONES: We haven't had a default in a major industrial nation since the Second World War. This is not something we're very used to. It's not something that policy makers are necessarily comfortable with. In fact they're very uncomfortable with it. We don't know what the connotations will be. It's a very uncertain process.

DAVID TAYLOR: What is certain however is what investors are looking for Greece to achieve in the next 10 years, if of course it can make it through the next couple of months.

Berenberg Bank senior economist Christian Schulz.

CHRISTIAN SCHULZ: Is Greece going to be able to regain competitiveness within the euro? Is Greece going to have a sustainable debt level after 2020?

DAVID TAYLOR: Questions that wouldn't carry so much weight if much of the euro zone wasn't dependent on Greece's ultimate economic survival.

The fear is if Greece falls, other, larger economies like Italy will also bite the dust; a scenario nobody can afford.

The IMF will release its latest world growth figures later tonight – figures economists will analyse very closely.