Eurozone swept by fresh panic as leaders mull Greece

Europe's debt crisis threatened to spill over to Italy, Spain and beyond, challenging eurozone finance ministers to overcome sharpening divisions over options for indebted Greece.

Meeting in Brussels to finesse a second rescue package for Athens in September, ministers from the 17-nation zone huddled as fears of debt crisis contagion rattled Italy and Spain, its third and fourth largest economies.

The euro slumped to its lowest level in six weeks, stock markets closed with heavy falls, including an almost 4% plunge in Milan, and borrowing costs rose to 12-year euro-era record highs in Spain and Italy.

"We are looking at something which is more systemic" than Greece, said Spanish minister Elena Salgado. "It concerns the stability of the eurozone in general."

With the fate of the single currency again hanging in the balance, EU finance officials were under mounting pressure to bridge a rift over the terms of a second Greek bailout and speak with a single voice.

A news conference was expected later in the evening. After preparatory talks on Greece notably gathering European Central Bank chief Jean-Claude Trichet and Eurogroup chairman Jean-Claude Juncker, European Union President Herman Van Rompuy issued a statement saying "we also exchanged views on recent developments in the euro-area."

The statement highlighted peaking worries over debt crisis contagion after heavily indebted Italy -- with a 1.9 billion euro debt -- came under attack last week.

And in a rare move, concerned German Chancellor Angela Merkel stepped in to urge the Italian parliament to pass an austerity budget to avoid it being dragged into a debt crisis that so far has hit smaller nations, Greece, Portugal and Ireland.