Greece is teetering on the edge of exiting the eurozone and markets worldwide are nervous mainly due to a lack of tools needed to deal with such issues in Europe, says Roger Altman, chairman at Evercore Partners and former Deputy Treasury Secretary.

The Greek economy is not that large, but the Spanish, Portuguese and Italian economies are, and fears persist that a Greek exit from the eurozone could pressure other countries to follow suit.

"In economic and financial terms, Greece is tiny, and it's not the core question," Altman tells CNBC.

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"Yes, the markets are fixed with it and yes, there is contagion risk if Greece should exit but fundamentally, the eurozone does not have the rescue tools and the protection tools, which are necessary in a situation like this, and I think the market is fundamentally focused on that."

The continent's sovereign rescue fund, the European Stability Mechanism, has yet to take effect and might not be large enough to bail out bigger economies once it is ratified later this year, Altman says.

The eurozone lacks a central banking deposit insurance body, and it also doesn't have a reliable system of banking supervision and examination.

The continent also lacks a fund similar to the U.S. Troubled Asset Relief Program that purchased assets and equity stakes from troubled financial institutions in the U.S. during the downturn.

The eurozone did approve $125 billion in funding for Spain recently to recapitalize the country's banks, but the move falls short in that ultimately, it does nothing to lower the country's overall debt burdens.

"The Spanish banking rescue was quite sadly flawed. It consisted of senior secured loans when equity was necessary. It was provided in the form of an overall loan to the State of Spain, which already was over-borrowed, and the market took one look at it and realized how flawed it was and it obviously didn't accomplish very much," Altman says.

"Spanish yields are much higher now than they were right after the rescue was announced. So there are in other words so many design flaws that are that we can see now that are on the table, and so central to the situation right now. I think that's why it's on the brink."

Yields rise when bond prices fall, reflecting greater perception of risk.

Calls for more centralized fiscal planning have grown in Europe.

Currently, eurozone countries share a common currency but borrow and spend largely on their own though members did recently pledge to better integrate fiscal policies.

Meanwhile, calls for all eurozone countries to back and underwrite an single bond issue to prop up ailing member nations have grown as well, with resistance, however, coming from European paymaster Germany, who says selling so-called euro bonds unfairly asks its taxpayers to shoulder more and more Greek debt.

That might be necessary, another noted economist points out, adding Europe needs to find a balance of paying down debts while fostering growth as well.

"To prevent a disorderly outcome in the eurozone, today’s fiscal austerity should be much more gradual, a growth compact should complement the EU’s new fiscal compact, and a fiscal union with debt mutualization (euro bonds) should be implemented," New York University economist Nouriel Roubini writes in a Project Syndicate column.

"In addition, a full banking union, starting with eurozone-wide deposit insurance, should be initiated, and moves toward greater political integration must be considered, even as Greece leaves the eurozone," Roubini adds

"Unfortunately, Germany resists all of these key policy measures, as it is fixated on the credit risk to which its taxpayers would be exposed with greater economic, fiscal, and banking integration. As a result, the probability of a eurozone disaster is rising."

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