"Growth has stalled in Europe, and there is a risk of a new recession," economic chief economy tsar Olli Rehn said in a statement overnight, nothing that GDP is "now projected to stagnate until well into 2012".
The European Commission has reduced its forecasts for next year, with growth of just 0.5% compared to the previous forecast of 1.8%.
A report from the EU also warned that sovereign debt levels rose to 90.4% of GDP, up from an earlier forecast of 88%.
The issue has prompted harsh words from Treasurer Wayne Swan, who has said the world is paying "a very high price" for Europe's failure to implement a plan to pay down its debt.
"Sort it out, get your act together," Swan said, according to Fairfax. "The global economy is paying a very high price for the failure of the Europeans to reform their economies over a long period of time."
"All my colleagues are dismayed by the events in Europe," Swan said as APEC finance ministers prepared to meet. "We've got to keep that pressure up because the stakes are really high."
Shares open flat after more positive US leads
The Australian sharemarket has opened higher this morning after more positive leads in the United States, where investors are still awaiting a long-term plan on how Italy and Greece will restructure their governments and pay down debt.
However, shares have fallen during the morning. The benchmark S&P/ASX200 index was up 2.1 points, and 0%, to 4246.2 at 12.00 AEST, while the Australian dollar was also flat at $US1.01c.
AMP shares rose 1.29% to $4.31, while Commonwealth Bank shares rose 0.96% to $49.30. NAB shares lost 0.69% to $24.36, as Westpac shares rose 0.05% to $20.87.
In the United States, the Dow Jones Industrial Average rose 1% or 112 points to 11,893.1.
Leighton confirms full-year forecast
Leighton Holdings has confirmed its full year forecast for a profit of $650 million, with chairman Stephen Johns saying the company had a 30% increase in revenue during the first quarter of the year.
"For the full six-month period to December 31, 2011, the company expects to report an operating profit after tax of around $250 million," he said in a statement. "In addition, we expect to report a profit of between $600 to $650 million for the 12 months to June 30, 2012."
Johns recorded a loss during the 2010-11 financial year.
Transfield confirms $132 million in new work
Transfield has confirmed it has won $132 million worth of work in the resources industry, announcing five new contracts.
The largest of the five is a five-year contract with coal seam gas exploration company QGC, while others include deals with Easternwell and Arrow Energy.
"The two new coal seam gas contracts in Queensland give us a strategic foothold in this key industry," chief executive Peter Goode said in statement.
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