Prime Minister Julia Gillard has highlighted the importance of Europe's economic recovery to Australia's fortunes, vowing to maintain a strict fiscal line to avoid the fate of other nations.
More than $31 billion was wiped off the value of Australian shares on Thursday as Italy emerged as the new centre of concern in the eurozone debt crisis.
Ms Gillard said Australia had a strong stake in Europe getting its house in order and maintaining the stability of the eurozone following tumbles on overseas markets overnight.
"Because the Australian economy - and public revenues - are most definitely touched by the developments in Europe," she said in an address to the Business Council of Australia in Sydney on Thursday night.
"We live in a world where movements in financial markets in the North Atlantic are felt through the markets of Asia and beyond - a fact we have seen reflected just today.
"Our real economies, through direct trade and investment, and the trade and investment of our major trading partners are deeply interdependent too."
The G20 meeting was vital to delivering important steps towards dealing with the crisis, Ms Gillard said.
"Any threat to the stability of the eurozone, in turn a threat to European banks, could decimate, not just devalue, Europe's domestic currencies and cause havoc through financial markets.
She urged European finance ministers to take rapid steps in the coming days to quell the crisis.
"European finance ministers must now details how a larger European Financial Stability Facility will be financed and how it will operate," Ms Gillard said.
"With markets now questioning whether Italy and Greece can deliver on their commitments, the consequences of any indiscipline and indecision in Europe could not be clearer - nor the need more urgent."
Financial markets were looking for reassurance that there was a political will to find solutions to the problems, Ms Gillard said.
"As I told European leaders in Cannes, it is time to turn words into deeds."
She said Australians should be optimistic, with fundamental reforms - including the carbon price and the mining tax, as well as investment in the National Broadband Network - set to provide a boost to the whole economy and productivity.
The government would hold its fiscal discipline, Ms Gillard said.
"It is vital at a time of heightened global instability and intense markets scrutiny of high sovereign debt levels," she said.
"The recent turbulence in global markets is due in very large part to the failure of too many governments around the world to develop and then deliver credible fiscal paths back to surplus.
"We won't make that mistake.
"A strong and credible fiscal strategy like ours underpins confidence in our economy and supports job creation."
