Greece is set for a second round of talks with its international creditors on its precarious financial plight, even as there are new warning signs throughout Europe about the fallout from the continent's debt contagion.
Greek Finance Minister Evangelos Venizelos is planning to talk late Tuesday with officials from the International Monetary Union, 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 austerity budgeting plan to cut its huge debt load.
The international groups are demanding that the Athens government speed up its spending cuts and lay off thousands of government workers before they will release another portion of Greece's $159 billion bailout from last year. Without the new money, Greece is in danger of defaulting next month on its financial obligations.
Meanwhile, the EU's competition commissioner, Joaquin Almunia, warned that more than the nine banks that failed stress tests this summer may need to be recapitalized because they 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 on negative.
S&P said several factors played into the decision for the credit downgrade for the Rome government, including economic, fiscal and political weaknesses.
The Italian Parliament last week passed an austerity plan valued at more than $80 billion. The Italian government is hopeful the austerity plan will balance the Italian budget by 2013. Italy is the eurozone's third largest economy.
In Greece, Venizelos said his talks Monday with the creditors were “productive and substantive.”
A Greek default could have devastating consequences throughout the entire European Union, the United States and world financial markets.
The White House says U.S. President Barack Obama spoke to German Chancellor Angela Merkel by telephone Monday on the eurozone crisis. It said both agree that concerted action would be needed in the coming months to assure a global economic recovery.
