Berlin  - The leaders of Europe's major economies are hoping to hammer out plans this weekend to face up to the global recession against the backdrop of a deepening sense of economic gloom in Eastern Europe and a shakeout in the region's currencies.

After a dramatic sell off in currencies and shares earlier in the week, a fragile calm returned to Eastern European markets Thursday on hopes that Sunday's meeting will deliver a blueprint for addressing the slump and overhauling financial markets.

But economists believe that crumbling economic growth, escalating unemployment, rising budget deficits and falling foreign investment could trigger further turmoil on Eastern Europe's financial markets and result in another round of falls in currencies.

The result was to ratchet up the pressure on the euro because of the economic and financial links between the 16-member eurozone's leading economies and the new European Union (EU) member states in Eastern Europe such as Poland, the Czech Republic and Romania.

"Concerns over Western Europe's exposure to the credit story emerging economies in Europe, the Middle East and Africa continues to weigh on the euro," said ING bank economist Chris Turner.

Hosted by German Chancellor Angela Merkel, Sunday's meeting has is to prepare for the April summit of the leaders of Group of 20 (G20) developed and emerging nations.

The G20 meeting, which is to be held in London, is to review the moves towards reforming the global financial system and the steps aimed at warding off recession.

G20 finance ministers are also due to meeting next month in London to lay the ground for the April summit, which will be only the second time that the G20 leaders have met since the group was founded in 1999.

In addition to Germany, the leaders of France, Italy, Britain, the Netherlands and Spain are to attend Sunday's meeting in the Chancellor's office in Berlin. The Czech Republic, which currently holds the EU's six-month rotating presidency is also to take part.

But said Turner the rapid credit growth in emerging economies and its impact on the loan books of Western banks "looks set to linger during the first half of this year and keep the euro under pressure."

In particular, this followed a Moody's credit rating agency warning earlier in the week that western European financial houses with offshoots in Eastern Europe risked facing downgrades as a result of the uncertainty gripping Eastern Europe's banking sector.

This in turn adds to the risk of further falls in currencies and shares across Eastern Europe whatever the outcome of Sunday's European leaders' meeting.

At one point this week, the Polish zloty was down more than 30 per cent since August last year before rebounding on soothing words from the government in Warsaw.

In the meantime, shares in Prague and Warsaw hit a five-year low on Tuesday amid evidence that economic growth has been slowing dramatically across Eastern Europe.

Poland's government has now slashed its 2009 growth forecast for the country to just 1.7 per cent from a previous forecast of up to 5 per cent.

Economic growth in the small Baltic state of Latvia plunged by 10.5 per cent in the fourth quarter last year.

Fast-paced growth in Slovakia, which in January became the latest of the new EU member states to sign up for the euro, also appears to have come to an end.

The nation's GDP dropped from 6.6 per cent year on year in the third quarter last year to 2.7 per cent in the final three months of the year. Meanwhile, the government in Bratislava this week casted doubt on its 2.4-per-cent forecast for 2009.

However, the pressure on Eastern European currencies is also reducing the scope for central banks across the region to take advantage of the slowing economic growth and dwindling inflation to cut rates as a means of helping to spur growth.

"It is very likely that if the Czech koruna remains under sell-off pressure, the Czech National Bank will pause with further monetary easing," said Danske Bank analyst Stanislava Pravdova.

"This is relevant for other CEE currencies and the central banks' actions," she said. (dpa)