Europe is teetering on the edge of financial chaos and threatening to throw the global economy back into recession, but reforms similar to those taken in the U.S. in 2008 could end market-roiling uncertainty, says Roger Altman, chairman of Evercore Partners and former Deputy Treasury Secretary under President Clinton.

Concerns that Greece will default and exit the eurozone are spreading, with fears the larger Spain and possibly Italy could follow a Greek exit.

"Europe is on the verge of financial chaos," Altman writes in a Washington Post OpEd. "Global capital markets, now the most powerful force on earth, are rapidly losing confidence in the financial coherence of the 17-nation eurozone. A market implosion there, like that triggered by Lehman Brothers collapse in 2008, may not be far off."

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

"Not only would that dismantle the eurozone, but it could also usher in another global economic slump: in effect, a second leg of the Great Recession, analogous to that of 1937."

So what does Europe do?

Push through similar measures like those carried out by the U.S. in wake of the Lehman Brothers collapse of 2008, when the Federal Reserve provided $13 trillion to bolster the credit system, including special facilities for money market funds, consumer finance, commercial paper and other sectors, Altman recommends.

The Bush administration pushed through the $700 billion Troubled Asset Relief Program, which stabilized the banking system as well.

A European version of such measures would include "a larger and instantly available sovereign rescue fund that could temporarily finance Spain, Italy or others if those nations lose access to financing markets," Altman says, adding that existing stability funds are not big enough to firewall the debt crisis.

Europe also needs to create a central entity to insure all eurozone bank deposits.

Such entities exist at the national levels but a backup body is needed to prevent bank runs.

Lastly, Europe needs its own TARP-like fund to inject equity into shaky banks and force them to recapitalize, Altman adds.

Furthermore, such measures won't serve as long-term cures for the eurozone but rather, short-term relief while member nations carry out more lasting structural reforms.

"Permanent stability will come only from full union across the board. And markets will support the simple currency structure only if they see a true plan for promptly achieving this. The 17 member-states must jointly put one forward," Altman writes.

Finance Ministers and Central Bankers from the Group of Seven countries have agreed to an emergency conference call to discuss ways to ease the crisis.

Spain is coming under increasing financial strain as it works to prop up its banking sector and regional governments, and concerns persist the country would be much tougher to bail out than Greece, which received rescue funding earlier this year.

"There's a heightened sense of alarm over developments in Europe, particularly in Spain," a G-7 source tells Reuters.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.