Greece has started a second round of talks with international creditors on its precarious financial plight, as there are new warning signs throughout Europe about the fallout from the continent's debt contagion.
Finance Minister Evangelos Venizelos talked late Tuesday with officials from the International Monetary Fund (IMF), the European Union and the European Central Bank. Initial discussions were halted Monday so that financial experts could take a renewed look at Greece's plan to cut its huge debt load.
Creditors are demanding that the government in Athens speed up its spending cuts and lay off thousands of government workers before they will release an $11 billion portion of Greece's $159 billion bailout from last year. Without the new money, Greece is in danger of defaulting on its financial obligations next month.
On Tuesday, the Greek government promised more cuts in government payrolls in addition to the 200,000 it has laid off in the last two years. As talks resumed to avert the immediate crisis, the Fitch Ratings financial services firm said it expects Athens to eventually default on its obligations, but not leave the bloc of 17 nations that uses the common euro currency.
The EU's competition commissioner, Joaquin Almunia, warned that more of the region's banks may be in need of increasing their capital reserves. Earlier this year, nine banks failed so-called "stress tests" designed to identify which ones are holding too much debt from European governments in danger of defaulting on their loans.
On Monday, the Standard & Poor's financial services firm cut Italy's credit rating one notch from A+ to A and kept its outlook negative. S&P said several factors played into the decision for the credit downgrade, including economic, fiscal and political weaknesses.
The Italian parliament last week passed an austerity plan valued at more than $80 billion. The government is hopeful the austerity plan will balance the Italian budget by 2013. Italy is the eurozone's third largest economy.
A Greek default could have devastating consequences throughout the entire European Union, the United States and world financial markets.
Some information for this report was provided by AP, AFP and Reuters.