Eurozone seeks agreement to help Greek cashflow

The 17 countries that share the debt-challenged euro currency will meet in Luxembourg from 1500 GMT, seeking evidence on whether Greece should receive an eight-billion-euro tranche of loans, blocked by the IMF for the past month.

International auditors spent the weekend trying to obtain the most accurate picture of Greece\'s finances and forecasts, after protests including staff occupations of ministries slowed the resumption of negotiations.

The Athens government did nothing to improve the mood of investors when it announced Sunday that the budget deficit should drop to 8.5 percent of GDP in 2011 from 10.5 percent last year, short of an earlier target.

In 2012, Greece expects a further reduction of public deficits, setting the target to 6.8 percent of gross domestic product, instead of the 6.5 percent originally forecast.

The deficit target is linked to a bailout package that Greece needs to avoid running out of cash. The government says it needs the loans to pay salary and other bills this month.

Asian markets were the first open to react to the news, which heightened fears over the prospect of a devastating debt default and reinforced concerns over eurozone policymakers\' ability to surmount the debt crisis.

Japanese stocks fell 1.78 percent as exporters tumbled while the euro fell against major counterparts.

Hong Kong lost 4.95 percent by the break, while Sydney was off 2.78 percent at the close. Singapore was down 1.79 percent and Taipei slipped 2.93 percent. Markets in South Korea and China were closed.

"It is far from a given that policymakers will succeed in turning the tide in markets in the final quarter of the year," Sharon Zollner, senior economist at ANZ Bank in Wellington, told Dow Jones Newswires.

European Union economic and monetary affairs commissioner Olli Rehn will give the eurozone finance ministers assembled in Luxembourg the inside track on what the Washington-based IMF wants to do, as fears grow that Greece\'s crisis could infect the global economy.

The expectation is that the European Central Bank, soon under new Italian management, will step back in.

Athens is labouring under a crushing 350 billion euros or more of debt, with its stripped-bare economy already on its knees.

The United States and other major economies are showing growing signs of concern that Europe is too divided to solve the Greek problem or deal with problems in the much bigger Italian economy, and adequately re-capitalise banks that lose heavily in the event of default.

France is one of the most heavily exposed.

Outside Europe, the fear is that a ricochet effect could rip through global financial markets, already depressed as data increasingly point towards renewed recession.

Many want the legal status of the 440-billion-euro ($590 billion) European Financial Stability Facility (EFSF) changed to that of a bank, so that the bailout fund could leverage much more firepower in the event of a crisis.

Global pressure is on to resolve the problems before G20 leaders meet in Cannes on November 3-4.

US Treasury Secretary Timothy Geithner has already urged German Finance Minister Wolfgang Schaeuble to put more of Berlin\'s financial heft at the eurozone\'s disposal if things worsen.

But Schaeuble said at the weekend that the 211-billion-euro limit set for its exposure will not rise.

An immediate obstacle to overcome is final ratification of an agreement reached by eurozone leaders in July giving the EFSF the scope to intervene when sovereign governments get into cashflow difficulties.

As of Friday, 14 of the 17 eurozone countries had passed legislation the EU wants to be able to trumpet at a summit in Brussels on October 17-18.

The EU-IMF auditors returned to Athens on Thursday, four weeks after they abruptly left disappointed at Greece\'s lack of progress in implementing promised structural reform measures.

They pressed the government to undertake further austerity measures to reduce expenses and increase revenues.

Athens unveiled late on Sunday a plan to shrink its bulging civil service by 30,000 people by the end of the year.

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