European stocks are expected to open sharply lower on Monday following news that Greece is set to miss deficit targets despite a raft of new austerity measures.
Asian stocks tumbled and the euro fell while gold rose, with investors jittery after the news.
Late on Sunday the Greek finance ministry announced draft budget forecasts which showed its deficit will be bigger than expected under the terms of its July 21st rescue agreement. The news came as the Greek cabinet signed off on new, even harsher austerity measures.
Greek officials had hoped that the agreement on new austerity measures would see officials from the International Monetary Fund, the European Central Band and the European Union sign off on its latest tranche of aid under the terms of a previous rescue package following talks in Athens over the weekend.
Eurogroup finance ministers will later today meet in Luxembourg to discuss how to ensure Greece implements structural reforms and whether or not to leverage the size of the European Financial Stability Fund (EFSF) the fund set up to bail out distressed members of the euro zone.
Over the weekend the German Finance Minister used a newspaper interview to make it clear that his government will not give anymore funds to the EFSF. That would cap the fund at 410 billion euros ($543 billion) meaning leveraging up the cash is the only option left to policymakers aiming to find a solution to the euro zone debt crisis.
French central bank governor and ECB board member Christian Noyer echoed the German finance minister's comments overnight, saying there would be no more cash for the fund.
"Whether amounts are big enough is a matter of opinion," Noyer said in a speech.
"It would be unrealistic to expect an increase in the EFSF itself but I am personally open to any scheme that would allow existing commitments to be leveraged to provide greater intervention capacity."
Meanwhile Joseph Ackermann, the CEO of Deutsche Bank and chairman of the Institute of International Finance, warned against changing the terms of a proposed Greek debt swap.
Some EU officials are demanding bigger haircuts for private investors but Ackermann warns such a move could lead to a collapse in support for the debt swap and have "incalculable consequences."
In Madrid the El Mundo paper reported that a number of Spanish banks are concerned about the fiscal health of some regional governments. The paper wrote that bankers fear default, with a number of regional governments facing debt maturities of nearly 7 billion euros before the end of the year.
In the UK George Osborne, the UK chancellor is expected to use his annual address to his Conservative Party to defend his government's austerity program. In the speech, Osborne is expected to say he will freeze local council taxes next year.
Silvia Wadhwa will be live from Luxembourg with all the latest on the euro zone debt crisis from 07:45 London time.
Stephane Pedrazzi will be live from Madrid with the latest on the Spanish banks situation.
CNBC will broadcast live in the UK George Osborne's speech at 11:20 London time.