Osborne: Greece is bigger threat than S&P downgrade

S&P cut the ratings of France, Italy, Spain and other states on Friday, while talks on how Greece will reduce its mountain of debt have yet to reach a deal.

"I would say almost more so than the downgrading, the ongoing uncertainty about how they are going to write off some of the private sector debt in Greece is an almost greater source of instability at the moment in the euro zone," Osborne told BBC radio.

European stock markets ticked higher in early trade on Monday, suggesting the S&P downgrade was largely expected and had been priced in.

Talks with banks on a bond swap scheme designed to cut Greece's debts are expected to resume on Wednesday. Failure to find a solution could lead to a damaging Greek default in March when bond payments are due.

Osborne, who is visiting China and Japan this week in a drive to attract Asian investment and give a boost to Britain's struggling economy, urged European leaders to do more to support their single currency.

"What the euro needs to do is to show convincingly that it can stand behind its currency," he said.

"We haven't actually seen much evidence of the pooled resources needed by the euro to actually provide confidence to the market that they will stand behind their own currency."

Britain would consider committing more money to the International Monetary Fund to prop up the global economy if needed, Osborne added, echoing comments he made last week.