UPDATE 3-IMF warns on euro zone stability risk, cash reserves

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BERLIN Jan 28 (Reuters) - The stability of the euro zone will be in danger if governments do not coordinate more closely on economic policy, the head of the International Monetary Fund (IMF) was quoted on Wednesday as saying.

Dominique Strauss-Kahn also renewed warnings that the fund could run out of cash for country bailouts this year, as the fund prepares to issue new forecasts showing global growth sliding to close to zero this year.

"The euro zone needs more coordination on economic policy. Otherwise, differences between states will become too big and the stability of the currency zone is in danger," IMF Managing Director Dominique Strauss-Kahn told the weekly in an interview. with the German weekly Die Zeit.

So far, politicians have not backed French suggestions for a European economic body, pointed out Strauss-Kahn.

The IMF had enough money to help states in the crisis, but Strauss-Kahn said that if the Fund had to stump up cash for all the countries requesting help a large share of its resources would be consumed in 6 to 8 months. Thus it needed extra funds.

"Several states are already queuing at our doors. At the moment, we have enough money. But if we actually have to help them, the lion's share of our resources will be consumed in 6 to 8months. That's why I'm already asking member states for additional funds, and Japan has already given its consent," he said.

The fund is due to issue revised forecasts for global growth at 1400 GMT on Wednesday and a source told Reuters earlier this week that it would slash estimates of world growth to just 0.5 percent, from 2.2 percent in its last outlook in November.

The source said the fund would forecast the U.S. economy to contract 1.6 percent this year compared to an earlier forecast of a 0.7 percent fall. The euro zone will be seen shrinking 2 percent this year versus a earlier forecast 0.5 percent decline.

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The revised outlook is also expected to forecast world growth of 3 percent in 2010, U.S. growth of 1.6 percent and a euro zone expansion of just 0.2 percent, the source told Reuters on Monday.

Strauss-Kahn said he did not expect big industrial nations to go bankrupt as a result of the financial and economic crisis.

"But if we do not succeed in getting this crisis under control then it cannot be ruled out. That is why we have to act," he said, adding a pickup was possible early in 2010.

Central banks had "reacted well" to the financial crisis, Strauss-Kahn told Die Zeit, but added it would not be wrong for the European Central Bank "to speed up things a bit more".

He urged governments to help restructure banks.

"There will be no economic recovery as long as banks pile up new debt," he said, adding governments should also consider nationalising financial institutions.

"In some cases the temporary takeover of a bank by the state will be necessary," he said, adding the creation of a "bad bank" to take on toxic assets was a sensible idea.

Asked if he agreed with newly-appointed U.S. Treasury Secretary Timothy Geithner that China was manipulating its currency, Strauss-Kahn said the IMF had consistently argued that the Chinese currency was undervalued.

"But that isn't the most important problem today," said Strauss-Kahn, saying he was more worried about the drying up of capital flows into emerging economies.

(Reporting by Madeline Chambers and Kerstin Gehmlich; editing by Patrick Graham)