After finance ministers failed to clinch a new rescue package for Greece on July 11, stocks and the euro tumbled amid warnings that a Greek debt default could infect the third and fourth biggest eurozone economies, Italy and Spain.

Some observers warned the crisis could drive Greece to abandon the euro and could even break up the eurozone altogether.

"The policymakers' continued dithering appears to be pulling both Spain and Italy further into the crisis," wrote analysts at financial consultancy Capital Economics.

"Either they stop fiddling and take decisive action or they may soon have to start contemplating the unthinkable."

Belgian Finance Minister Didier Reynders told La Libre Belgique newspaper: "Helping Greece is also helping ourselves by avoiding bringing the whole eurozone into chaos."

EU president Herman Van Rompuy said the summit in Brussels on July 21 will focus on "the financial stability of the euro area as a whole and the future financing of the Greek programme."

Greek Prime Minister George Papandreou said it was time for Europe to "wake up" and find a conclusive solution to his country's debt crisis.

"We are in the process of reaching a long-term debt breather," he told Sunday's Kathimerini daily, referring to efforts between European leaders and foreign ministers to reach a formula that will make the nation's 350-billion-euro ($495-billion) debt viable.

"At this stage, there is no room for voices that cultivate fear and bank on failure," Papandreou said.

The EU and International Monetary Fund bailed out Greece in May 2010 with a package worth 110 billion euros ($160 billion) in exchange for a series of unpopular austerity measures to stabilise its public finances.

Greece is still in serious difficulty and needs another bailout valued at around the same amount. Its debt has exploded and market hostility has kept it from raising fresh loans.

Ireland and Portugal have also had to be bailed out, while Italy and Spain are seen to be at risk due to their strained public finances.

Italy's parliament on Friday passed a 48-billion-euro austerity budget aimed at slashing the public deficit by 2014.

Eurozone leaders are now considering ways to buy up Greek debt to take the short-term pressure off Greece. A key sticking point is what the role of private lenders in this restructuring might be.

Germany is pushing for Greek banks to help shoulder the burden of a second bailout scheme. Critics warn that markets could interpret this as an effective default, with banks forced to let Greece off, and panic would escalate.

EU officials have also mooted a convoluted plan to lend Greece money with which it can buy back its own debt at a reduced price on secondary bond markets, effectively postponing its repayments to give it breathing space.

Some have suggested the eurozone issue "eurobonds" to raise money for Greece at lower borrowing rates. The head of Germany's central bank Jens Weidmann slammed this as unfair to European taxpayers, in comments published Sunday.

Market tension was heightened last week by the release of the results of "stress-tests" which diagnosed eight European banks as unstable, after the close of markets on Friday.

Critics said the test was not tough enough since it did not include the possibility of a sovereign debt default by a country such as Greece, raising fears for how markets will react when they open on Monday morning.

Meanwhile markets are anxiously watching a row in Washington between US President Barack Obama and his Republican opponents in Congress who reject his plans to raise the country's debt limit to allow more US borrowing.

The government has warned that failure to reach a deal could tip the world's richest economy into a debt default.

US Secretary of State Hillary Clinton visited Athens on Sunday to offer support in the crisis.

"We stand by the people and government of Greece as you put your country back on a path to economic stability and prosperity," she said in Athens.

"I applaud the Greek government on its willingness to take these difficult steps," Clinton added.

Copyright AFP (Agence France-Presse), 2011