WORLD leaders arriving in Mexico for today's G20 summit have been warned that Europe's economic ills could precipitate a second global financial crisis.
On the eve of the summit, outgoing World Bank chief Robert Zoellick said Europe was ripe for a "Lehmans moment" — a reference to the 2008 collapse of Lehman Brothers in the United States and the dire global unravelling that followed.
His warning came as Greeks voted in elections that have the potential to undermine the region's already fragile economic predicament, and ultimately trigger the eurozone's break-up.
The vote in Greece came as Spain signed on for a financial bailout — and Italy appeared likely to be next. Ireland, Portugal and Greece have already been bailed out.
Mr Zoellick's message was that Europe could muddle through. But, he told The Observer, all that was needed to engulf the whole continent — and by contagion the global economy — was fear in the aftermath of the collapse of a single financial institution and a run on its funds by its customers.
European financial institutions are on crisis alert, to manage any collapse of confidence as markets digest the outcome of the Greek vote — the result of which was expected to be known in the early hours of today Melbourne time.
And as European leaders butt heads on how best to salvage the failing economies — either by austerity to save or borrowing for growth — all eyes and ears in the Mexican resort city of Los Cabos will be on German Chancellor Angela Merkel.
The Greek vote was expected to be close run — either a rejection of austerity that might lead to abandonment of the euro; or a willingness to remain in the eurozone, with a plea for some easing of the austerity measures imposed on Athens by its European paymasters.
Dr Merkel appears to be holding to the austerity line. At the weekend she insisted again there would be no renegotiation of the Greek bailout, and that the country must stick to the bargain with its international lenders.
Jean-Claude Juncker, Luxembourg's Prime Minister and head of the eurozone finance ministers' conference, warned: "If the radical left wins [in Greece] – which cannot be ruled out – the consequences for the currency union are unforeseeable."
On arrival in Los Cabos, all G20 leaders were to receive a letter from Prime Minister Julia Gillard. Writing from the lofty perch of Australia's relative economic success, she warns uncertainty in Europe is "moving us quickly into crisis management mode".