Italian lawmakers were set to give the nod on Saturday to a reform package aimed at staving off bankruptcy, as Greece got to work on its own economic makeover after a week of eurozone debt trauma.
Italy's lower house of parliament was to meet from 1130 GMT to give final approval for the reforms already agreed by the senate -- paving the way for Prime Minister Silvio Berlusconi's resignation and the formation of a new government.
Stock markets rallied after Friday's senate vote in Rome and the swearing in of a new government in Athens tasked with saving that debt-stricken nation from economic collapse.
US stocks jumped about two percent and European stock markets closed sharply higher, up to 3.68% in Italy. Dealers said the gains reflected investor relief that Rome and Athens were taking steps required to ease the eurozone debt crisis.
International Monetary Fund chief Christine Lagarde on Saturday welcomed "significant progress" made in Greece and Italy towards political stability, after European Union President Herman Van Rompuy said the Italian reforms were "a major step in the right direction".
But Russian Prime Minister Vladimir Putin said Moscow was "very worried" by the eurozone crisis.
"If measures are not taken urgently... the next step is stagnation," he said. "We count on the EU authorities and countries to intervene in the process and stop this development of events."
Klaus Regling, the head of the eurozone crisis fund, meanwhile, called on Italy to elect a new government "as soon as possible" so as to soothe the markets.
After a parliamentary revolt deprived his centre-right coalition of a ruling majority, Berlusconi undertook to resign once parliament approved the reform measures -- which include state asset sell-offs and incentives to hire workers and boost competition.
Former EU commissioner Mario Monti, a 68-year-old economist supported by the markets, has emerged as the most likely head of a transition government.
But while the main opposition Democratic Party backs Monti, parts of Berlusconi's coalition and the small opposition Italy of Values party want President Giorgio Napolitano to dissolve parliament and call early elections.
Analysts warn an election campaign now -- more than a year before the next parliamentary vote was expected in 2013 -- could plunge Italy further into financial chaos.
"The country needs reforms, not elections," Van Rompuy said after meeting Berlusconi in Rome on Friday.
The Italian 10-year bond rate, which spiked above the 7.0 percent danger level earlier in the week, fell to 6.602% on Friday.
In Athens, meanwhile, the head of the new government, Lucas Papademos, sought to reassure EU and IMF creditors that Greece will stick to its international obligations as the country seeks to secure billions in fresh bailout funds by mid-December.
Finance minister Evangelos Venizelos kept his post in the incoming team, which includes a former EU commissioner and several far-right lawmakers and will need to push through painful austerity measures to avoid bankruptcy.
The government's first job is to persuade the EU and IMF to disburse eight billion euros ($11 billion) from a 2010 bailout deal that is needed by December 15.
It must then force through the reforms in return for a second EU bailout package of 100 billion euros in loans, the same amount in debt reduction and a further 30 billion euros in guarantees.
Jean-Claude Juncker, who heads the group of eurozone finance ministers, said he was confident that Greece's new government would "honour all its commitments to the eurozone", while urging rapid implementation of changes.
EU economic affairs commissioner Olli Rehn has warned that the debt crisis was dragging Europe towards a new recession in 2012 due to a "vicious circle" of government debt, vulnerable banks and collapsed spending.
An EU forecast said growth across the eurozone next year would collapse to 0.5% -- a steep drop from its previous prediction of 1.8%.
But Van Rompuy stressed there were no plans to "prune" the eurozone following reports that Berlin and Paris were considering a currency union without the weaker states.
"Let us be clear: we will not 'prune' the eurozone to a more selective club. That would be contrary to the letter and spirit of the European political pact," he said.
The spread between German and French 10-year government bond rates narrowed Friday after hitting a historic high of 170 basis points on concerns that France may join Italy and Greece in struggling to fund its debt.
In Spain, figures on Friday showed economic growth falling to zero in the third quarter of 2011 from the previous quarter, stoking recession fears just days before a general election.
And in Portugal, lawmakers gave preliminary approval for a rigid 2012 budget on the eve of an anti-austerity rally called by civil servants and military personnel in Lisbon for Saturday.