WASHINGTON (Reuters) - Medium-term fiscal consolidation and growth will put Europe on a sound footing to avoid another sovereign debt crisis despite rising debt levels caused by the COVID-19 pandemic, the head of the International Monetary Fund said on Tuesday.

Managing Director Kristalina Georgieva, speaking remotely to an event hosted by Bocconi University in Italy, said she regards digital currencies backed by central banks to be the most reliable form of digital money and that it is difficult to think of Bitcoin and other crypto assets as money.

Georgieva said that Europe was more fit to avoid another debt crisis such as the one faced by Greece in the aftermath of the global financial crisis of 2007–08.

But she said countries would have to plan carefully how to shift course to medium-term fiscal consolidation to erase the increased pandemic-related debt burden.

Georgieva said that 110 countries among the IMF membership are at some stage of looking into central bank digital currencies, and a key challenge was how to guarantee interoperability of digital currencies.

"De-facto assets" like Bitcoin are not backed by assets that hold their value stable and can rise and fall sharply, Georgieva said, adding: "In the history of money, it is difficult to think of them as money."

She said the top consideration for policymakers exploring digital currencies is whether they can be a means of exchange that the public can trust. Other considerations are whether the digital currencies contribute to domestic economic stability and how they fit into international regulatory frameworks, such as those being developed by the Bank for International Settlements.

It is "very impressive how much the international community, the central banks, institutions like ours are now actively engaged to make sure that in this fast moving world of digitalization, money is a source of confidence and helps the economy function rather than (being) a risk."

(Reporting by Andrea Shalal and David Lawder; Editing by Giles Elgood)