The head of the global banking lobby which handled the private debt write-off for Greece warned on Friday that if the country leaves the eurozone, the world economy would suffer badly. The head of the Institute of International Finance (IIF), Charles Dallara, also urged the European Union to set up a system to guarantee savers\' deposits in banks. And he suggested that the timetable for eurozone governments with severe debt problems to correct their public finances should be eased to allow time for growth to ease the effort, arguing for a \"more realistic\" approach. Banks in Greece and Spain in particular have been weakened recently by heavy withdrawals of savings. \"It is a mistake to think that an exit by Greece from the eurozone will not have a very serious effect on the European banks, on the ECB (European Central Bank), on countries like Italy, Spain and Portugal due to contagion,\" he told Il Sole 24 Ore newspaper. \"Furthermore, it would destabilise the whole world economy,\" he said. The IIF represents leading banks around the world, notably on the restructuring of private debt. Dallara said that the EU should move fast to adopt a mechanism to guarantee bank deposits. The issue was raised at an informal summit of EU leaders late on Wednesday. \"There\'s no risk at the moment of a large-scale capital flight but we have allowed uncertainty over Greece to affect other countries, such as Spain,\" Dallara said. It has got \"to the point that the markets no longer know how adequately to differentiate between the solidity of the three large banks -- Santander, BBVA and Caixa -- and the savings banks,\" Dallara said, just as trading in shares in Bankia, the fourth-biggest Spanish bank, was suspended. Bankia is estimated to need up to 20 billion euros ($25 billion) in help from the Spanish state to avert collapse. \"European authorities need to clarify the dimensions of the problem and move towards a targeted European intervention,\" he said. He said the eurozone needs a \"more realistic approach\" towards austerity to avoid killing off growth, and warned against \"too much insistence on reducing short-term deficits while the aim should be medium-term sustainability.\" \"The first act risks undermining the credibility of the second,\" he said, adding that \"at this point, it would be better to relax the schedule on balance adjustment to leave more space for growth.\"