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Bank of France Gov. Christian Noyer said the European crisis has worsened “significantly,” as deepening investor concern over the region worsens market volatility.

“The situation in Europe and the world has significantly worsened over the past few weeks,” Noyer said at a forum in Tokyo on Monday. “Bond markets in the euro areas are not functioning normally. Economies outside the euro area are feeling the effects of increased uncertainty, lower growth prospects and capital repatriation.”

More than $4 trillion has been wiped out from global equity values this month as concern Europe’s crisis will spread spurred a surge in Italian borrowing costs. Noyer said that despite the turmoil, confidence in the euro is “as strong as ever” and signaled a reluctance to purchase more bonds to save indebted countries in the region.

The euro was traded around $1.32 or 1.33 in Tokyo on Monday, compared with $1.3239 on Friday, when it completed a 2.1 percent weekly decline.

The Italian daily La Stampa said the International Monetary Fund is preparing a €600 billion ($799 billion) loan for Italy in case the debt crisis worsens, without saying where it got the information. The shared currency traded around ¥103 on Monday.

Noyer reiterated his resistance to buying more government bonds from the euro area to shore up confidence, saying that “any lasting liquidity backstop” must come from governments and not the central bank.

Monetary authorities from the U.S. and U.K., which have been buying “significant amounts” of public debt, would be risking spikes in long-term interest rates “in a different inflation environment,” and markets are already hedging against inflation “tail risks,” he said.

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