Eurozone leaders face an unprecedented emergency as they head to Brussels today, after Thursday’s shock stock market plunge confirmed fears that the Greek debt crisis is spiralling out of control.

Vanessa Mock explains:

In a staggering, panic-stricken day of trading, the euro hit a 15-month low against the dollar.

Wall Street stocks plunged by nearly 10 percent at one stage, it seems a technical glitch played a role, but even after clawing back the worst of the losses, the US markets were still battered, ending three percent lower extending a week-long losing streak.

Asian worries
The trend has continued across Asia today, where stocks have fallen across the board and the Bank of Japan fed billions into the market in a dramatic pre-emptive strike. The Japanese prime minister said he was “very worried” by the instability.

Rattled investors are taking flight from the single European currency over fears that a 110 billion euro bail-out will not be enough to prevent Greece from collapsing under its mammoth debt mountain and going bankrupt, dragging other eurozone nations with it.

Shaken foundations
In the past days, the Greek debt problem has turned into a financial cliff-hanger that is starting to engulf Spain, Portugal and other eurozone countries. This domino-like contagion threatens not only the survival of the euro, but is also shaking the very foundations of the European Union, analysts say.

“I am holding my breath,” said Paul de Grauwe, an economics professor at the Catholic University of Leuven and advisor to the European Commission. “A few months ago, I would have said we could have solved this by taking steps to stabilise the euro. But that didn’t happen. The contagion has already happened.”

Indecision
Eurozone leaders will be under huge pressure when they meet in Brussels later on Friday to find a way to restore calm after their weeks of dangerous indecision over whether or not to bail out Athens. The summit had been called to formally rubber-stamp their loan to Greece, funded jointly with the International Monetary Fund, which was agreed last week as a way to help the country ride out the storm and secure its debts. But when it finally came, this lifeline failed to calm market jitters.

“Leaders must find a way of preventing the crisis in Greece spiralling out of control, prevent it from bankrupting Greece and prevent it from spreading to the other eurozone countries. Because if it does, it will quite possibly lead to the unravelling of the eurozone,” says Simon Tilford, chief economist at the Centre for European Reform in London. “That would be terribly damaging for Europe, for the EU and the political fall-out would be enormous.”

But at this late stage little can be done, says Cinzia Alcidi of the Brussels-based Centre for European Policy Studies (CEPS). “If there is panic there is not much you can do. The role of [government leaders] is to send out a message in order to manage expectations. But if there’s panic, this doesn’t work in the usual way. So no matter what happens [tonight], I expect no change in the markets.”

War on speculators
As Wall Street dived, the German Chancellor, Angela Merkel, lambasted speculators and said she was “determined to win” in what she termed “a battle of the politicians against the markets.” She also attacked ratings agencies, which have played a critical role by downgrading Portugal’s debt rating this week, thereby deepening the pressure on the euro. Both Merkel and French leader Nicholas Sarkozy have called for more regulation and tighter controls on ratings agencies.

Peter de Gauw of Leuven University though points out that Merkel contributed to the crisis “by constantly hesitating and going back on her promises. That helped sharpen the crisis and created a situation whereby we now have to pay more than we would have paid otherwise.”

Simon Tilford argues that the current market fears are “fully justified” and Berlin is wrong to shoot the messenger. “Financial speculators will not be to blame if the euro really does start to unravel,” he told RNW.