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Markets are waiting for a confidence vote on the government in the Greek parliament later in the day, a step toward the passage of more spending cuts in exchange for foreign loans.

Meanwhile, international lenders are making an unexpected visit to Athens to check on its resolve to implement painful austerity plans that have caused weeks of public protests and political confusion.

The euro last traded at $1.4340, well above the three-week low of $1.4073 it hit last Thursday, but down from the day's high of $1.4385.

"In the big scheme of things, market players are starting to believe that euro zone policy makers, especially German policy makers, will try to avoid a hard landing in Greece," said Makoto Noji, senior strategist at SMBC Nikko Securities.

If the vote is passed, the Greek parliament will vote on the austerity measures on June 28. Euro zone finance ministers gave Greece two weeks from Monday to approve further spending cuts and tax rises in return for another 12 billion euros in emergency loans.

Were Greece to default on its sovereign debt, it could trigger a global financial crisis in much the same way that Lehman Brothers' collapse did in 2008, markets fear.

Credit rating agency Fitch said on Tuesday it would regard both a Greece sovereign debt swap and a rollover of maturities, even a voluntary one, as a default.

Japan's Nikkei average .N225 was up 0.6 percent at 9412.87, MSCI's index of Asia-Pacific stocks .MIAPJ0000PUS excluding Japan was up 0.7 percent, and indices in Hong Kong and South Korea also rose.

The outlook for the Nikkei was largely rangebound trading for the rest of June, an analyst said.

"At least until the central bank's tankan is out (on July 1), rises are likely to be limited to around 9,500," said Kenichi Hirano, a strategist at Tachibana Securities, referring to the Bank of Japan's quarterly survey of corporate sentiment.

"The market has priced in bad sentiment for the April-June quarter, but if the outlook for July-September is bright, the market may rise further."

Brent crude oil for delivery in August was steady at $111.71 a barrel. ICE Brent futures lost 1 percent on Monday as worries about a resolution to the Greek debt crisis made investors more risk averse, traders said.

Gold inched up to $1,541.29 per ounce by 0150 GMT, after closing at $1,540.95 on Monday. Gold, one of the chief beneficiaries of worries about the security of currencies and other assets, set a record high of $1,575.79 per ounce in early May.

The definitive comments weighed on the euro and underscored how much is at stake for Greece, which is struggling to implement a deeply unpopular fiscal austerity plan necessary to win the next tranche of emergency aid from the European Union and International Monetary Fund.

Fractious euro zone finance ministers are trying to patch together a second aid package for Greece, with more official loans and, for the first time, some sort of contribution by private investors who hold Greek government bonds.

"Fitch would regard such a debt exchange or voluntary debt rollover as a default event and would lead to the assignment of a default rating to Greece," Andrew Colquhoun, head of Asia-Pacific sovereign ratings with Fitch, said at a conference in Singapore.

A month ago Fitch downgraded Greece's credit rating three notches to "B+" and warned it could cut the rating further into junk territory. At the time, the rating agency said an extension of the maturity of existing bonds would be considered a default.

Standard & Poor's cut Greece's rating to "CCC" from "B" on June 13, and warned that any attempt to restructure the country's debt would be considered a default.

Moody's has a Caa1 rating to Greece's sovereign debt, which implies a 50 percent chance of a default within three to five years.

Fitch's Colquhoun also reiterated that the rating agency would place the U.S. sovereign rating on watch negative if Congress did not raise the federal government's borrowing ceiling by August 2, and said if the U.S. government misses an August 15 coupon payment, then Fitch would place the rating on restricted default.

But it added it believed it was very likely that the debt ceiling would be raised and default would be avoided.

Fitch had made similar comments earlier this month and Moody's and S&P have issued warnings along the same lines. But Fitch was the first major ratings agency to say U.S. Treasury securities could be downgraded, even for a short period.

U.S. lawmakers working to rein in rising debt said on Monday they will have to make substantial progress this week to ensure the country retains its top-notch credit rating.

(Reporting by Masayuki Kitano, Writing by Kevin Plumberg; Editing by Kim Coghill)

After two days of crisis talks, the ministers effectively issued Athens an ultimatum, saying the Greek government, parliament and broader society had until July 3 to approve a new austerity package that includes privatization measures in order to secure the release of the next tranche of EU/IMF aid.

Greece risks defaulting on its debts if the next tranche, the fifth installment of 110 billion euros ($155 billion) of loans agreed with Athens in May 2010, is not released in time.

"The approval of the Greek parliament is absolutely essential and it will have to arrive in a timely fashion so we can take a decision on July 3," said Jean-Claude Juncker, who chairs the Eurogroup of the 17 euro zone finance ministers.

"It is clear that the (Greek) debt is sustainable, but the debt will only remain sustainable if Greece fulfills all its commitments which it agreed with the troika," he told reporters, referring to the European Union, International Monetary Fund and European Central Bank.

Finance ministers from the Group of Seven industrialized nations held a second conference call on Monday after discussing on Sunday night the potential impact on global financial markets if Greece were to default.

Both calls were organized by French Finance Minister Christine Lagarde, the favorite to be named as the IMF's new chief this month.

"We have a calendar; we have a roadmap," Lagarde told reporters in Luxembourg. "Efforts have to be undertaken, in the first place by Greece, which leaves here knowing that it has considerable parliamentary efforts to make."

In Washington, the White House restated its view that the crisis could pose a risk to fragile economic recoveries around the world if it spins out of control, but that the mechanism exists to contain it.

"It does create a headwind, and that's why it needs to be resolved for the global economy," said Jay Carney, the presidential spokesman. "We believe Europe, working with the Greek government, can resolve it."

Greece's newly appointed finance minister, Evangelos Venizelos, issued a statement shortly before Juncker spoke saying he would strive to ensure the already reworked austerity program was approved, possibly by June 28.

"The overriding aim is to develop a clear relationship of trust, to stabilize the situation, to have a disbursement of the fifth installment, Venizelos said. "The political time has been compressed a lot. Each day is of extreme importance and hence we cannot afford to waste a single hour."

Shoring up their ability to tackle any further problems in the euro zone, the ministers also rubber-stamped an agreement to increase the effective lending capacity of the current bailout fund, the EFSF, to 440 billion euros by increasing guarantees.

And they said the European Stability Mechanism, the permanent crisis fund that will replace the EFSF from June 2013, would not have preferred creditor status when it comes to loans to Greece, Ireland and Portugal, a change that eased concerns among private creditors about its structure.

ATHENS ON WATCH

In Athens, crowds of anti-austerity demonstrators gathered in the central square outside parliament, but there were no new clashes with police. Power workers began a strike and blackouts were expected in parts of the country.

In parliament, Greek legislators debated the highly unpopular plans, which aim to produce a further 6.5 billion euros in budget savings this year, and 28 billion through 2015, and raise 50 billion euros from the sale of state assets.

On Sunday, Prime Minister George Papandreou appealed to the nation to accept steps that certainly in the short term will make life harder for most citizens.

"The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility," Papandreou said at the start of a confidence debate on his new crisis cabinet.

While some financial experts in Greece expect protest to die down and the package eventually to be approved, one Greek newspaper on Monday said the EU had treated Greece poorly.

Blaming "the stupidity of Europeans," the Eleftherotypia newspaper wrote in an editorial:

"Today it's at risk of becoming Europe's little whore. If the euro's 17 members do not understand that to save their economy they must become one federation, the euro will collapse and with it half of its economies."

NEW INSPECTIONS

Inspectors from the EU and IMF will make a further visit to Athens this week -- having just completed an inspection -- to examine changes the country wants to make to the plan, Olli Rehn, the EU's monetary affairs commissioner, said.

In order to impose a deadline on Athens, Juncker said he had already scheduled an extraordinary meeting of euro zone finance ministers for July 3, when the disbursement of the 12 billion euros will be approved -- if Greece keeps its side of the deal.

The euro weakened against the dollar marginally on Monday and the cost of insuring Greek and Italian debt against default rose, a reflection of the increasing risk of contagion across highly indebted euro zone states from Greece's problems.

Ratings agency Moody's said on Friday it could downgrade Italy's Aa2 rating in the next 90 days given concerns Greece's crisis could derail Italy's tepid recovery.

While it seems likely that Athens will eventually get the next tranche, as well as a further emergency loan program of around 120 billion euros up to the end of 2014, the net result is only to buy Greece more time -- the possibility of a debt restructuring in the longer-term, or even default on a portion of its debt, has not gone away.

After their meeting into the early hours of Monday, the euro zone ministers announced that they were ready to put together a second package of loans for Greece, despite the country having missed debt targets in the first package.

The second package, to be outlined by mid-July, will include more official loans and, for the first time, a contribution by private investors, who will be expected to voluntarily purchase new Greek bonds as existing ones mature.

(Additional reporting by John O'Donnell, Daniel Flynn, Annika Breidthardt and Julien Toyer in Luxembourg, and Renee Maltezou and George Georgiopoulos in Athens; Writing by Luke Baker; Editing by Mike Peacock/Ruth Pitchford/Ron Askew/Eric Walsh)

Meeting into the early hours of Monday, ministers indicated that the next tranche of EU/IMF aid would be paid by mid-July, allowing Athens to avoid default, but said it was up to Greece to show concrete progress on plans to cut spending, raise taxes and generate other revenue streams first.

"We are waiting for a decision from the Greek parliament. We are calling for not just the government, but the Greek opposition to support the plan," Belgian Finance Minister Didier Reynders said ahead of a second day of meetings in Luxembourg.

"We are increasing the pressure because there are precedents," he said, referring to Greece's not meeting commitments in the past and falsifying statistics. "We have to be sure that everyone is going to support the plan."

In Athens, anti-austerity demonstrators gathered in the central square outside parliament, but there were no new clashes with security forces. Power workers began a strike and blackouts were expected in some parts of the country later in the day.

In parliament, legislators are debating the highly unpopular plans to cut spending, further increase taxes and privatize state assets, measures already agreed with the EU, IMF and the European Central Bank to bring finances back into line.

On Sunday, Prime Minister George Papandreou asked Greeks to support the austerity steps and avoid a "catastrophic" default, appealing for the nation to accept deeply unpopular tax hikes, spending cuts and privatization plans.

"The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility," Papandreou said at the start of a confidence debate on his new crisis cabinet.

Inspectors from the EU and IMF will make a further visit to Athens this week -- having just completed an inspection -- to meet the new finance minister and examine some of the tax measures, Greek government officials said.

Euro zone ministers seemed intent on delivering a message of tough love to Athens, which agreed a 110 billion euro program with the EU in May last year and is expected to get a second package worth as much or more before long.

The fifth tranche of the first program -- the 12 billion euro payment -- is due in July. Without it, Athens has warned that it could default on its debts, an event that would could wreak havoc on global markets and threaten other European sovereigns and banks.

"Greece itself must create the conditions so that the next tranche can be paid out as agreed. That's due in July. It is Greece's responsibility that we're having difficulties now," German Finance Minister Wolfgang Schaeuble said of the next tranche payment.

While it seems likely that Athens will eventually get the next tranche, and a further emergency loan program of around 120 billion euros up to the end of 2014 will also be agreed, the net result is only to buy Greece more time -- the possibility of a debt restructuring in the longer-term, or even default on a portion of its debt, has not gone away.

The euro weakened slightly against the dollar on Monday and the cost of insuring Greek and Italian debt against default rose, reflecting concerns about potential contagion to other states on the euro zone periphery.

Ratings agency Moody's said on Friday it could downgrade Italy's Aa2 rating in the next 90 days given concerns Greece's crisis could derail Italy's tepid recovery.

PRIVATE SECTOR ROLE DEBATED

In a statement issued after a seven-hour meeting in Luxembourg that ended in the early hours of Monday morning, the euro zone finance ministers also announced they would put together a second bailout of Greece, which missed debt targets in the first rescue plan by big margins.

To be outlined by mid-July, it will include more official loans and, for the first time, a contribution by private investors, who will be expected to maintain their exposure to Greece's sovereign debt market through voluntary purchases of new bonds as existing ones mature.

The statement did not say how large the new bailout would be, or give details of the private sector contribution beyond describing it as "substantial."

Euro zone officials have told Reuters the new plan is expected to fund Greece into late 2014 and feature up to 60 billion euros of fresh official loans, 30 billion euros from the private sector, and 30 billion euros from Greek privatization proceeds.

In an attempt to win the cooperation of the European Central Bank, which opposes any scheme that would cause credit rating agencies to declare Greece in default, the ministers said the private sector debt rollover would avoid even a limited or "selective" default.

They did not say how this would be achieved.

Discussions with private sector creditors -- European banks, pensions funds and other investors in Greek bonds -- have already begun, but Germany's Schaeuble indicated that there was still some way to go before there is wide agreement on how they will be voluntarily involved and to what extent.

"We have to talk about that now, with all the institutions involved," he said on Monday. "It's a fine line. On the one hand it has to be voluntary, because otherwise there will be consequences, but on the other hand it must also lead to a result. We will continue to work on that."

(Additional reporting by John O'Donnell, Annika Breidthardt and Julien Toyer in Luxembourg, and Renee Maltezou and George Georgiopoulos in Athens; Writing by Luke Baker; Editing by Mike Peacock)

The euro currency fell on Monday and European stocks dropped after euro zone finance ministers delayed a final decision on extending emergency loans to debt-stricken Greece, dashing hopes for a quick solution to the political impasse.

Euro zone finance ministers postponed a final decision on extending 12 billion euros ($17 billion) in emergency loans to Greece, saying Athens would first have to introduce harsh austerity measures.

The ministers said they expected the money, the next tranche in a 110 billion euro bailout of Greece by the European Union and the International Monetary Fund, to be paid by mid-July. Greece has said it needs the loans by then to avoid defaulting on its debt.

Moody's on Friday threatened to cut Italy's credit ratings in the next 90 days on worries that Greece's crisis may drive euro-zone interest rates higher and derail Italy's fragile economic recovery.

U.S. oil fell as much as $1.04 a barrel to $91.97 on Monday, extending last week's losses.

Ford Motor Co (F.N) is spending $1 billion in an effort to develop a new generation of vehicles for its struggling Lincoln brand, the Wall Street Journal reported on Sunday, citing dealers briefed on the plan.

General Electric Co (GE.N) on Sunday reached a tentative, four-year national labor contract with two key unions that cover more than 15,000 GE workers, or about 11 percent of its U.S. employees.

The Dow and S&P 500 rose on Friday after France and Germany outlined an agreement to aid debt-burdened Greece, but analysts said a recent bearish trend may not be over.

The Dow Jones industrial average .DJI rose 42.84 points, or 0.36 percent, to end at 12,004.36. The Standard & Poor's 500 Index .SPX gained 3.86 points, or 0.30 percent, to 1,271.50. But the Nasdaq Composite Index .IXIC fell 7.22 points, or 0.28 percent, to 2,616.48.

(Reporting by Blaise Robinson; Editing by Will Waterman)