(REUTERS) - International bankers called on Group of 20 finance leaders on Friday to step up their efforts to promote economic growth, warning that spillover risks from the euro zone remain.

While the latest Greek rescue package is a major step forward that will help reduce uncertainty, the sovereign debt crisis remains unresolved and overly rapid fiscal cutbacks damage the short-term outlook, the Institute of International Finance said on the eve of the G20 finance meetings here.

Policymakers should work on reducing euro-area strains, take a more balanced approach toward financial regulation and step up their policy coordination to improve the global growth outlook, the IIF said in an open letter to the G20.

It welcomed the important progress Europe has made so far in addressing its sovereign debt problems through an emergency bailout fund, central bank liquidity, and toughened fiscal rules. But budget cutbacks in weaker countries could result in higher debt-to-GDP ratios.

While necessary, fiscal austerity will in the short term weigh on already sub-par growth, it said.

Mitigating the impact of fiscal austerity is key, the IIF said. It proposed a slower pace of budget consolidation in countries that have the room, and a pooling of fiscal burden to help weaker countries as the euro zone over time moves toward a closer fiscal union.

(Reporting By Stella Dawson; Editing by Chizu Nomiyama)