The EU acted yesterday to put a firewall between Greece's dire financial situation and the destiny of Ireland and Portugal, the two other countries that have already received international aid.
Finance ministers agreed important changes to both its current and future bailout funds, which they hope will reinforce confidence in the eurozone's struggling economies as the debt crisis in Greece reached new depths.
They agreed to raise their guarantees for bailout loans given out from the current rescue fund to €780bn (£686bn) from €440bn (£387bn), said Klaus Regling, who manages the Luxembourg-based fund.
The European Financial Stability Facility (EFSF), as the fund is known, requires significant over-guarantees to get a good credit rating and make the bonds it issues attractive to investors.
On top of that, the ministers also made an important tweak to their future rescue fund, which they hope will help already bailed-out countries regain access to debt markets.
The so-called European Stability Mechanism, which will come into force in mid-2013, when the EFSF expires, will not have preferred creditor status when it helps countries that have already been bailed out, said Jean-Claude Juncker, the Luxembourg Prime Minister who also chairs the meetings of eurozone finance ministers.
Having preferred status means the fund would be repaid before any private creditors. That had been harshly criticised by many economists, who said it would deter banks and other investment funds from lending any money to already-struggling countries.
Accountancy firm Ernst -amp; Young (E-amp;Y) warned that the eurozone will tumble into recession if the financial markets react badly to the Greek debt restructuring, adding that it would "inevitably raise questions" over the future of the single european currency.
E-amp;Y released its Euro Zone Forecast summer edition yesterday, predicting just 1.6% growth in GDP next year. Yet even that could come under pressure if the financial situation in Greece falls apart. The report cautioned that a disorderly restructuring of the crisis-hit country "would plunge the whole eurozone back into recession".
The accountants said the sovereign debt crisis had now "reached a new stage. What was unthinkable one year ago, namely Greece requiring new financial assistance and having to restructure its sovereign debt, is now unavoidable".