The International Monetary Fund on Friday urged developed nations to curb their budget deficits, warning the effect of the crisis have been "severe."

"As economic conditions improve, the attention of policy makers should now turn to ensuring that doubts about fiscal solvency do not become the cause of a new loss of confidence: recent developments in Europe have clearly indicated that this risk cannot be ignored," the IMF said in a regular report on public finances.

"Major fiscal consolidation will be needed over the years ahead, " it added.

According to the IMF, primary deficits in developed countries rose by 7.5 percentage points of GDP between 2007 and 2010, reflecting underlying spending increases, stimulus measures, and cyclical factors.

"Among advanced economies, about two-thirds face primary adjustment needs lower than 5 percentage points of GDP, while one- fifth require adjustments great than 8 percentage points of GDP," it the Washington-based agency.

"The effects of the crisis have been severe, particularly in advanced countries," warned the IMF.