Reserve Bank Governor Alan Bollard says October will be a critical month for the US and Europe to try to find credible solutions to their debt problems.
Dr Bollard has just returned from Washington where he attended the International Monetary Fund and World Bank's annual meetings.
Dr Bollard says the atmosphere was thoroughly depressing as officials worried about debt problems in Europe and the slowdown in the US.
He says October will be a crucial month for finding solutions to stabilise the eurozone debt crisis, but getting all countries to agree to an increased bailout fund will be a difficult and complex task.
Dr Bollard says ideally a credible package would be presented at the G20 leaders meetings in France in early November, but he believes there's only a 50/50 chance of this happening.
He says if that does not occur, funding markets will remain volatile and there will be unwillingness to lend except on cast iron securities and to very good borrowers, which is why it's important for New Zealand and its banks to remain in those categories.
International markets have been very volatile of late, as investors become increasingly sceptical Greece can avoid a debt default, and that policy makers can prevent the crisis rolling to other nations.
But Dr Bollard says no-one really cares about Greece any more as it is being used as the canary in the coal mine.
He says all the talk is now about what damage could be done to Italy.
Dr Bollard says exposures to the Greek economy are relatively small and constrained and are not going to bring down sovereigns or major banking systems.
In contrast, Italy and Spain have a lot of exposure to French and German banks.