Leading policymakers spoke with unusual frankness on Friday of their fears that the euro zone's financial and banking woes could derail the global economic recovery.
The troubles of Greece and other heavily indebted European governments dominated conversations among finance ministers of the Group of 20 leading economies meeting in the southern port city of Busan, officials said.
It is essential to ensure continued recovery that Europe fix its banks. It is essential that certain vulnerable European nations follow through with major fiscal consolidation, and get the job done, Canadian Finance Minister Jim Flaherty told reporters.
Gatherings such as the G20 are typically a stage for ministers to radiate confidence, especially when financial markets are in a nervous state, as they are now.
But Flaherty was not alone in his warnings.
We can't afford to be complacent, South Korean Finance Minister Yoon Jeung-hyun told the opening session.
Without further and ongoing action from us, the recovery may not remain on track and we may not be able to achieve strong, sustainable and balanced growth, he said.
South African Planning Minister Trevor Manuel said he could not think of a more challenging time than the present for the Group of 20, which includes major emerging economies as well as the richest industrial nations. Decisions needed taking, he said, to banish the specter of a double-dip recession.
It's important that we all understand just how fragile the recovery is, Manuel, himself a former finance minister, said.
As ministers got down to work, police boats patrolled near the beach hotel where they are meeting. Authorities have steeped up security in response to war-like rhetoric on the divided peninsula after the South accused North Korea of sinking one of its warships.
French Finance Minister Christine Lagarde said the trick for the G20 was to staunch red ink in their public finances without squeezing the life out of the nascent recovery.
We spoke a lot about growth and the compatibility of this growth with necessary budgetary consolidation, especially in developed countries and not only in Europe, she told reporters.
Washington is pressing Germany, whose deficit is relatively modest by EU standards, not to undermine aggregate demand in the euro zone by ending its pro-growth policies prematurely.
But a senior German official said Finance Minister Wolfgang Schaeuble would announce that Berlin, under pressure from fiscally conservative voters to cut its deficit, would start unwinding its anti-crisis stimulus outlays from 2011.
The debate over how quickly to rein in deficit spending has gained urgency since the 16-nation euro zone agreed to a 110 billion euro rescue for Greece after Athens lost the confidence of bond markets and was unable to roll over its vast debts.
The euro zone, working with the International Monetary Fund, is also putting together a 750 billion euro ($910 billion) safety net for other member countries with big debts in case they too fail to find buyers for their bonds. A forced debt restructuring would inflict heavy losses on euro zone banks.
Investors first responded enthusiastically to the May rescue package, but the euro has since slumped to a four-year low against the dollar on doubts about the capacity of euro zone states to plug holes in their budgets.
World stock markets have shuddered at the prospect that Europe's difficulties could derail a recovery from the deepest financial crisis since the 1930s.
But U.S. Treasury Secretary Timothy Geithner sounded a more optimistic note.
The world economy came into this period of concern about Europe with stronger underlying momentum and growth than many people expected, and we're in a much stronger position to get through this, Geithner told CNBC television en route to Busan.
On the other main item on the Busan agenda, how to reform global banks to reduce the risk of another crisis, Canada's Flaherty said tough new global capital rules would be phased in over a longer time than originally planned.
In a sign that intense lobbying by banks for more time is paying off, Flaherty said: Implementation is a variable. Some would like a shorter period, some would like a longer period. I think that can be worked out over time.
A related proposal for a global levy on banks to pay for any future bailout was foundering on fierce opposition from Canada, among others.
Instead, ministers will work on a menu of options for their political leaders to endorse at a summit in Toronto at the end of the month. If all goes according to plan, they would then make more specific commitments at another summit in Seoul in November.
Different countries' banking sectors are in different situations. So there won't be a one-size-fits-all policy, said Sakong Il, a senior South Korean official.
(Additional reporting by James Pomfret, David Milliken, Louise Egan and Yoo Choonsik; Writing by Alan Wheatley; Editing by Tomasz Janowski and Jonathan Thatcher)