Australia will weather Greek crisis

Australia is the best placed western nation to deal with the evolving Greek and European crisis said Federal Treasurer Wayne Swan on Saturday.

According to the Treasurer, Australia was well positioned to weather economic shocks emanating from Greece, after the Reserve Bank of Australia warned that world jitters could intensify.

Eurozone leaders launched plans to create a new crisis fund for troubled countries as Greece grappled with debt chaos.

There is grave fear that the contagion of the Greek economic crisis will spread to Spain, Portugal, Ireland and Italy.

Many economists are suggesting that Greece will be unable to play back the $(AUD)170 bil EU/IMF loan and will ultimately default.

"There is obviously intense activity internationally over the weekend between national governments, particularly European governments and international financial institutions," Swan told reporters.

"Australia is in a strong position relevant to other advanced economies," he added.

"Of course, we take these events seriously."

The Reserve Bank on Friday warned that the situation in Greece was weighing on public sentiment and posed an ongoing downside risk for the global economy.

"It is possible that the fiscal problems in Europe could intensify, prompting a retreat from risk-taking by investors and a sharp slowing in the world economy, although, to date, the impact has been largely confined to Europe," the Reserve Bank of Australia said in its quarterly statement on monetary policy.

Prime Minister Kevin Rudd said sharply falling world markets had judged rescue plans to date "inadequate", adding that Australia was watching efforts to restore confidence with "considerable concern".

The 16 heads of the countries that share the euro currency Saturday said they want to build an emergency fund for countries targeted by powerful bond markets, after the region's debt mountain sent global bourses tumbling and triggered alarm from the United States to Asia.

The leaders, meeting for a late-night crisis summit in Brussels, acknowledged that the scale of the problem had gone beyond Greece, plunging the 11-year-old eurozone into a state of emergency.

Many economists are calling for Greece to leave the eurozone and revert back to the Drachma.

German Chancellor Angela Merkel said that the "stabilisation" fund would send "a very clear signal" to market speculators to back off.