There is new hope that European Union leaders gathering for a crisis summit Thursday will come up with a detailed deal for debt-strapped Greece after the EU's two most powerful members reached agreement.
There are no immediate details on a proposed rescue plan for Greece, reached by European heavyweights France and Germany late Wednesday. But a statement released following a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel said it would include participating from the banking sector - a key German demand.
Leaders of the 27-member European Union will discuss that proposal during a summit in Brussels, following growing panic in financial markets. The concern has widened beyond the shaky finances of Greece, Portugal and Ireland, who have all received EU rescue packages, to include Spain and Italy.
Last week, the International Monetary Fund warned the Greek crisis could contaminate other countries sharing the euro currency. Experts say Greece will need a second bailout of around $157 billion.
Speaking to reporters on Wednesday, European Commission chief Jose Manuel Barroso said the problems facing the 17-nation eurozone could have serious repercussions on the global economy.
"Nobody should be under any illusion. The situation is very serious," he said. "It requires a response - otherwise the negative consequences will be felt in all corners of Europe and beyond."
Barroso outlined what is needed to address the crisis, including dealing with Greece's public debt and its struggling banking sector, and making the eurozone's bailout fund more flexible.
Economics expert Venessa Rossi, of the Chatham House policy institute in London, says it is critical the EU leaders reach a clear agreement for Greece at the summit.
"If they don't do that, then I think the speculation about the other [troubled] countries will actually become worse and we will find ourselves in a widening crisis," said Rossi.
Rossi says the EU must address the widespread sentiment that Greece will default on its debt, even if it chooses to use less alarming terminology.
"We have to be quite clear about how much money is being put on the table, what will happen over the next few years that the financing is guaranteed and it is perfectly true that this is borderline to credit agencies calling it a restructuring," said Rossi.
Rossi and other experts believe that if EU leaders put off tough decisions once again, the eurozone's financial woes will only continue to mount during the summer break - making for a very difficult autumn ahead.
