BRUSSELS (AP/The Blaze) – Eurozone leaders scrambled to prevent financial chaos from spreading further and driving Europe's common euro currency into utter ruin.
The meeting of 17 nations was dominated by attempts to keep Greece afloat and find enough money to coat a veneer of credibility over Europe's rescue fund. It came on the third straight day that Italy has taken a beating in the bond markets, with investors growing increasingly wary of the country's chances of avoiding default.
Luckily enough, markets rose for the second day Tuesday on hopes that the enormous pressures on the ministers would produce some results.
The finance ministers approved the next installment of the Greece's bailout loan - €8 billion ($10.7 billion). Without that money, Greece would have run out of cash before Christmas, unable to pay employees or provide services.
The installment is part of a €110 billion ($150 billion) bailout package from eurozone nations and the International Monetary Fund (IMF) that has kept Greece afloat since May 2010. The new cash came after the EU demanded, and received, letters from top Greek political leaders pledging their support for tough new austerity measures.
In the latest sign of trouble, Italy was forced to pay an extremely high interest rate on an auction of three-year debt Tuesday. Demand was strong, but the 7.89 percent rate was nearly three percentage points higher than last month, an enormous increase. The auction raised €7.49 billion euros ($10 billion).
"But it's still worrisome that those yields are past the point which a week ago would have terrified global markets," said Quincy Krosby, market strategist for Prudential Financial.
Many analysts have concluded that Italy is too big for Europe to rescue. If it defaults on its €1.9 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.
At the meeting, 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 escape 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.
Aside from the money for Greece, some ministers acknowledged Tuesday they probably wouldn't reach their more important goal of increasing the leverage power of the European Financial Stability Facility (EFSF). Analysts believe the fund, which is supposed to be a firewall against financial contagion swallowing up nation after nation, needs to be expanded from €440 billion ($587 billion) to something like €1 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 likely fall to the European presidents and prime ministers attending a Dec. 9 summit 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. "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 nations "are enthusiastic about it." But she dismissed reports that the eurozone, or smaller groups of nations, might go ahead with their own swifter treaty.
Countries outside the eurozone heaped on the pressure, fearing drastic consequences if the euro were to fail. Bank lending would freeze worldwide, stock markets would likely crash, European economies would go into a freefall and the U.S. and Asia would take a big hit 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 need to be addressed- with €638 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.
Currently, 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. However, at the same time, it would raise Germany's borrowing costs.
Of course, one option EU sources said is being is explored is for euro system central banks to lend to the IMF so it can in turn lend to Italy and Spain while applying IMF borrowing conditions, reports TV New Zealand.
"We will discuss with the ECB. The ECB is an independent institution, so we will put on the table some proposals and after that it is for the ECB to take the decision," Belgian Finance Minister Didier Reynders told reporters.
An even more radical solution was proposed Tuesday by the head of Germany's exporters association: kick Greece and Portugal out of 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 craves.
"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.
The Associated Press contributed to this report.