The European and Asian markets have fallen sharply as investors look to offload riskier assets amid fears that the eurozone debt crisis is spreading.
The London stock market slid 0.76 per cent, Frankfurt shed 0.83 per cent, the main Paris index lost 1.15 percent and Madrid dropped 0.60 per cent by the Tuesday's closing. The euro also fell to a four-month low against the US dollar.
Asian stocks tumbled on Tuesday, with the Nikkei closing 1.43 per cent lower in Tokyo, Sydney losing 1.90 per cent, Hong Kong 2.19 per cent and Shanghai 1.48 per cent at the close of the day's trading.
In the US, the three major stock indexes closed in the negative, although only within one per centage point of where they had each started.
The overall losses come off the back of a steep sell-off on Monday.
"We're seeing a massive 'risk off' trade at the moment. Every time we seem to be gathering momentum, the European debt situation rears its ugly head again," said Ben Potter, strategist at IG Markets.
"Things in Europe just seem to be going from bad to worse; you get the feeling that authorities are merely trying to plug the holes in a sinking ship. At the end of the day, they're just delaying the inevitable," he said.
The market reaction comes as European finance officials pledged to bolster a rescue fund to end growing risks over Greece's debt crisis possibly spreading and disrupting other fragile economies.
With the future of the euro hanging in the balance, European Union leaders and the 17 eurozone ministers are due to meet for a second day in Brussels on Tuesday, under pressure to cobble together a consensus over a second Greek bailout designed to ease the threat to the eurozone's third and fourth biggest economies, Italy and Spain.
"[A bailout] is a fait accompli in principle but what they haven't agreed yet is how it's going to work in practice," Al Jazeera's Paul Brennan said from the sidelines of Monday's talks in Brussels.
"A consensus is developing among the Eurozone, though, that Greece will have to be allowed to write off at least some of its debts. They have been resisting that until now, but it does look inevitable that they'll have to write off some of it because they simply can't pay it all."
Sorting out the details
A senior EU source told the Reuters news agency that the finance ministers would discuss the option of buying back Greek debt, and explore a French plan that would involve private sector creditors rolling over around 70 per cent of their Greek debt into bonds and other securities.
Gerald Tan takes a look at the actual size of Greece's debt
Germany, and at least three other European governments, are determined that banks, insurers and other private holders of Greek bonds should bear a portion of the costs of a second Greek bailout, which could exceed $157bn.
"What we're looking at most probably is some sort of debt swap arrangement where they agree to continue extending a line of credit to Greece not just for three years but perhaps for an extra seven years," our correspondent said.
"It doesn't solve the problem but it does buy time, and it looks like that is the favoured option at this time."
Lagarde against second bailout
Christine Lagarde, the new chief of the International Monetary Fund, said on Monday that her organisation and its European partners, however, were not ready to discuss the terms of any second bailout for Greece.
"In my view we're not at the stage of discussing the
conditions and terms, and length and volume, and nothing should be taken for granted," Lagarde said.
"Greece has done a lot of work to reduce deficits and achieve fiscal consolidation in the range of five percentage points of GDP; this is a significant achievement," she added. "We all know this is not sufficient, that more work needs to be done."