Eurozone nations headed into fresh turbulence on Monday with alarm rising over a potential Greek default only days before vital talks to save Athens and contain the debt crisis.
|European Central Bank president Jean-Claude Trichet urged eurozone governments on Monday to rapidly implement a rescue package they approved in July to resolve the region\'s debt crisis.|
Stocks tumbled in Asia and nosedived in early trading in Europe as markets appeared to dismiss weekend promises by Greece on deficit cuts as too little too late, while worrying about stretched European banks.
After powerhouse Germany warned of a possible worst-case "orderly default" for Greece, the Greek Finance Minister Evangelos Venizelos on Sunday announced plans to slice an extra two billion euros ($2.7 billion) off the deficit.
The pledge of fresh action, via a real estate tax and month-long salary cut for elected officials, came amid concerns Greece might fail to meet the terms of the first 2010 bailout by the International Monetary Fund and 17-nation eurozone.
In Brussels, EU Economy Commissioner Olli Rehn hailed the Greek decisions and said a troika of IMF, European Commission and European Central Bank experts would head to Athens in coming days to look at releasing a new eight-billion-euro tranche of loans from the 2010 rescue package.
"Once Greece meets the conditions, I expect the review by the troika could be concluded by the end of September," he said.
And Internal Markets Commissioner Michel Barnier said in Paris that the EU was doing all it could to prevent a country default.
The so-called troika of lenders left Greece in displeasure early this month due to slippage on targets for debt and deficit reduction set under the 110-billion-euro rescue.
"It\'s very clear to us that this situation in Europe is not going to end well," said Charlie Aitken of Bell Potter investment brokers in Sydney.
After a summer of market havoc, the single currency was under pressure after a bleak week of pessimistic pronouncements evoking the implosion of the eurozone.
Next Friday and Saturday will see the first post-summer talks, in Poland, of finance ministers from the increasingly divided nations sharing the euro.
Split over how to address a crisis exacerbated by global economic gloom, the ministers are to discuss obstacles holding up a second 160-billion-euro bailout for Greece, agreed in principle at a July 21 summit.
But barely seven weeks on, pressure on the 12-year-old currency is seeing historic highs amid fears divided Europe could fail to stem debt contagion.
Top economists such as Nouriel Roubini and even Germany\'s former chancellor Gerhard Schroeder have warned only full "political union," something approaching a "United States of Europe," can keep the euro on its feet.
And US Treasury Secretary Timothy Geithner said at a weekend meet of the G7 powers in Marseille that European states needed to do more to prove they had the political will to deal with the financial crises roiling the continent.
But already, Finland wants cash collateral from Greece before lending any more money, and Slovakia -- which sat out the first bailout -- is threatening to delay ratification of the second rescue until year\'s end.
Meanwhile, exasperation with debt and deficit-offender nations is growing in Germany, Finland and the Netherlands.
Dutch Finance Minister Jan Kees de Jager last week raised the prospect of expelling offenders from the euro.
"If you can\'t stick to rules, you have to leave the game," he said.
Germany\'s Economy Minister Philipp Roesler pointedly said in a column on Monday that Europe could no longer rule out an "orderly default" for Greece.
"To stabilise the euro, we must not take anything off the table in the short run," wrote Roesler, who is also Germany\'s vice chancellor. "That includes as a worst-case scenario an orderly default for Greece if the necessary instruments for it are available."
In another blow to the eurozone\'s struggle to speak with a single voice on the crisis, ECB chief economist Juergen Stark abruptly quit on Friday.
The hawkish board member was an outspoken critic of the bank\'s controversial buying of eurozone government bonds on secondary markets to prevent borrowing rates rising to prohibitive levels.
The programme had been on hold until last month, when investors fled Italian and Spanish bonds, threatening to force a bailout of the eurozone\'s third- and fourth-largest economies.
The ECB has since bought more than 50 billion euros in eurozone debt, leading to growing calls for governments to issue jointly backed \'eurobonds\' in future -- a demand roundly rejected by Germany.