Italy's political party leaders were locked in talks Sunday to choose a successor to Silvio Berlusconi as Greece prepared to implement painful austerity measures to unlock fresh bailout funds. With both eurozone countries undergoing economic shock therapy to stave off bankruptcy, there were new warnings that the 17-nation eurozone's woes are threatening the global economy.
Italian President Giorgio Napolitano began a marathon round of talks on Sunday to choose Berlusconi's successor, with former EU commissioner Mario Monti widely expected to be picked to head a new transition government.
The president is in a race against time to have a new cabinet in place before the markets open on Monday, when the eurozone's third-largest economy will face its first bond auction test of the post-Berlusconi era.
Italy has a toxic mix of a 1.9 trillion euro (2.6 trillion dollar) debt, an extremely low growth rate and high borrowing costs - last week, long-term bond rates rose above 7.0 percent, a dangerous level that could make the nation's debt unsustainable within months.
Although both the IMF and European Financial Stability Facility have reportedly offered financial help, some economists have warned that, unlike fellow eurozone members Greece, Ireland and Portugal, Italy may be "too big to bail".
The clock is ticking too for Greece's new Prime Minister Lucas Papademos, who has already faced warnings from Germany and France that he has to implement promised austerity measures to qualify for the next slice of an international bailout loan.
Finance Minister Evangelos Venizelos, who kept his job in a government of national unity agreed last week, hopes the latest slice of the bailout agreed for Greece will be paid soon after another EU finance ministers meeting on November 17.
First though, Greece has to implement the measures agreed at the EU summit in Brussels on October 26-27: Venizelos said this was "urgent" and would be done "no later than Monday or Tuesday".
As part of the deal, private banks are to accept writedowns of 50 percent, which will allow Greece to wipe out nearly a third of its 350-billion-euro debt.
The procedure to confirm the new Greek government - which was voted in with a comfortable 254 out of 300 cross-party votes - will begin in parliament Monday, with a vote of confidence expected Wednesday.
Papademos on Saturday spoke with the leaders of France and Germany, who stood firm on their demand that before Athens received any more bailout money, it had to implement the measures that it agreed with the EU in October.
"The payment of the next tranche (of the bailout) can only take place when a decisive step has been taken in this matter," said a statement from French President Nicolas Sarkozy's office.
The new government's first job will be to persuade the EU and the IMF to disburse an eight billion euro slice of aid from a 2010 bailout deal that is needed by December 15 before state coffers run dry.
Then it must force through painful austerity measures exacted as the price for a second EU rescue package which gives Athens 100 billion euros in loans, the same amount in debt reduction and a further 30 billion in guarantees.
Pushing through new austerity measures is a daunting task in Greece, which has witnessed massive protests against further belt-tightening, which have often turned violent.
Meanwhile concerns mounted that the eurozone's woes were threatening the world economy, with US President Barack Obama warning that despite positive developments in Italy and debt-ridden Greece, much remained to be done to assure markets that countries like Italy could finance their debts.
"I think that we are not going to see massive growth out of Europe until the problem is resolved," Obama said. "And that will have a dampening effect on the overall global economy."
Chinese President Hu Jintao also warned that global economic recovery was "fraught with greater instability and uncertainty".