Europe's sovereign-debt dynamics are in danger of going badly awry if the region doesn't get a grip on its public finances, the International Monetary Fund said. The warning highlights growing concerns over fiscal sustainability across the continent as governments grapple with elevated borrowing costs and slowing growth.

The IMF emphasized that without decisive policy action, debt trajectories could become explosive, undermining financial stability and limiting capacity to respond to future shocks. The fund urged European policymakers to implement credible medium-term consolidation plans while protecting critical investments.

Markets have shown increased sensitivity to fiscal slippage, with bond spreads widening for countries perceived as lacking discipline. The IMF's assessment adds pressure on finance ministers ahead of upcoming budget negotiations and EU fiscal rule reforms.