BRUSSELS, BELGIUM – COULD Greece drag down Europe?

EU finance ministers are pressing their indebted and riot-prone Balkan member to embrace a massive austerity plan and plug its debilitating deficit. But with markets sceptical and the appetite for more bailouts at a low, there are deepening concerns that a Greek meltdown could deal a severe blow to the very European idea of a common currency, and set off a domino effect through Italy, Spain, and Portugal.

Yesterday, some European Union leaders said they were confident that Greece would pull itself out its debt crisis under a plan submitted by Prime Minister George Papandreou, which promises to cut expenditure and tighten the country’s notoriously leaky tax system.

Spanish Finance Minister Elena Salgado — whose country holds the rotating EU presidency — said she was “not worried” that Greece will default. But she refused to discuss the possibility of a bailout in case Greece fails to make debt repayments — fears that have sharply raised its borrowing costs.

“I think Greece is going to do all that is necessary to avoid that,” she said before chairing an EU finance ministers meeting.

A bailout would be a first for the decade-old eurozone, which now looks vulnerable and faces painful, unpopular measures such as budget cutbacks and higher taxes.

Other European governments were less sure — and reluctant to pay for Greece’s failure to manage its debt.

Finland’s finance minister Jyrki Katainen bluntly said the Greeks couldn’t expect “any outside help.” Dutch Finance Minister Wouter Bos said the Greek plan to cut debt “needs to be more substantial” because it is based on vague one-offs like a promised fight against corruption.

Markets are also sceptical that Greece can make the cuts that are needed. BNP Paribas currency strategist Ian Stannard said investors believe they “lack detail and in some respects appear unachievable.

Stannard cited the risk of investors losing their appetite for Greek bonds, 70 per cent of which are held by foreigners. “If foreign investors from outside the eurozone start to turn their back on Greek assets, this will have a significant negative impact on the euro.”

Bigger, better-off countries such as Germany would be faced with leading a bailout, but it’s not certain that their leaders — or voters — would agree. Meanwhile, other countries with heavy debt loads — Spain, Italy, Portugal, Ireland — would have to pay more to borrow if investors flee government bonds because of Greece.

European Central Bank head Jean-Claude Trichet warned openly last week that heavily indebted eurozone countries risk “rapid changes in market sentiment.”

EU Economy Commissioner Joaquin Almunia warned yesterday that it was up to those countries to take their own action to cut budgets “to be better protected in the face of this nervousness of the markets”.