With Italy sinking rapidly into financial chaos, the eurozone's 17 finance ministers scrambled Tuesday to find enough money to give their rescue fund a veneer of credibility and world markets some reason to believe their embattled currency won't break up.
Italy's borrowing rates shot up above 7 percent Tuesday, an unsustainable level that already has forced three smaller EU nations to seek bailouts. Markets rose for the second day on hopes that the enormous pressures on the ministers would produce some results.
The finance ministers were discussing ideas that until recently would have been taboo: countries ceding additional budgetary sovereignty to a central authority EU headquarters in Brussels.
Strengthening financial governance is being touted as one way the eurozone can get out of its debt crisis, which has already forced Greece, Ireland and Portugal into international bailouts and is threatening to engulf Italy, the eurozone's third-largest economy.
If Italy were to default on its euro1.9 trillion ($2.5 trillion) debt, the fallout could break up the currency used by 322 million people and send shock waves throughout the global economy.
The finance ministers also appeared intent on averting an imminent disaster in Greece. They approved the next installment of the country's bailout loan euro8 billion ($10.7 billion) without which Greece would have gone into default before Christmas.
But some finance ministers acknowledged that they probably wouldn't reach their goal of increasing the leverage power of the European Financial Stability Facility which is supposed to be a firewall against financial contagion from euro440 billion ($587 billion) to euro1 trillion ($1.3 trillion).
"It will be very difficult to reach something in the region of a trillion," said Dutch Finance Minister Jan Kees de Jager. "Maybe half of that."
And the task of agreeing on grand changes that might save the eurozone from splitting up will fall to European presidents and prime ministers at a Dec. 9 summit meeting in Brussels.
German Chancellor Angela Merkel reiterated her support for changes to Europe's current treaties in order to create a fiscal union with stronger binding commitments by all euro countries.
"Our priority is to have the whole of the eurozone to be placed on a stronger treaty basis," Merkel said Tuesday. "This is what we have devoted all of our efforts to; this is what I'm concentrating on in all of the talks with my counterparts."
Merkel acknowledged that changing the treaties usually a lengthy procedure won't be easy because not all of the European Union's 27 member states "are enthusiastic about it." But she dismissed reports that the eurozone, or some groups of nations, might go ahead with a swifter treaty between their governments.
Countries outside the eurozone also heaped on the pressure, fearing that if the euro were to fail, bank lending would freeze worldwide, stock markets would likely crash and Europe's economies would go into freefall. The pain would then spread to U.S. and Asia as their exports to Europe collapsed.
"I will probably be the first Polish foreign minister in history to say so, but here it is," Radek Sikorski said in Berlin. "I fear German power less than I am beginning to fear German inactivity ... the biggest threat to the security and prosperity of Poland would be the collapse of the eurozone."
Eurozone countries have enormous debts that must be refinanced with euro638 billion ($852 billion) coming due in 2012, of which 40 percent needs to be refinanced in the first four months alone, according to Barclays Capital.
The 17 ministers are also discussing jointly issuing so-called eurobonds an all-for-one, one-for-all way of having the different countries guaranteeing one another's debts.
Right now each nation issues its own bonds, meaning that while Italy pays above 7 percent, Germany pays about 2 percent. Having stronger countries like Germany stand behind the general European debt would lower Italy's borrowing rates and perhaps help it avoid a debt spiral toward bankruptcy. At the same time, it would raise Germany's borrowing costs.
An even more radical solution was proposed Tuesday by the head of Germany's exporters association: urging Greece and Portugal to leave the eurozone. BGA President Anton Boerner told The Associated Press that's the only way those two nations can spur the growth needed to overcome their crippling debts.
Analysts were doubtful that new cash for Greece and mere talk about the stability fund would bring the financial relief that Europe needs.
"The marginal impact of these bits of 'good news' should be limited at best and investors will still cast a nervous eye towards this week's bond auctions," said Geoffrey Yu, an analyst at UBS.