European stocks rose Tuesday on optimism Greece will receive another tranche of aid funding ahead of a second call between Finance Minister Evangelos Venizelos and officials from the European Union and International Monetary Fund.

Equities exchange traded funds were also getting a boost from expectations the Federal Reserve may announce additional stimulus after its two-day meeting concludes Wednesday afternoon. [Fed Preview: Operation Twist]

Vanguard European ETF (NYSEArca: VGK) was up 1.5% Tuesday afternoon in U.S. trading.

Greece is teetering on the edge of default as cash reserves are almost gone. European policy makers are rushing to protect the banking system.

According to the Greek Finance Ministry, the country is close to a deal for another chunk of bailout funding. [Greece Again Weighs on European ETFs]

“There will be additional volatility in the global financial markets heading into the end of the month as pressure to get Greece and others to enact their reforms will be white-hot intense,” Andrew Busch, global currency strategist at BMO Capital Markets in Chicago, stated on Reuters.

A default would put larger Eurozone economies such as Italy in danger, while hammering European banks with any exposure to Greece, wrote George Georgiopoulos and Ingrid Melander for Reuters.

Greece is likely to default but probably won’t leave the EU, Fitch Ratings said Tuesday. “Concerns over the risk of a break-up of the Eurozone are greatly exaggerated,” Fitch said, according to MarketWatch.

Standard & Poor’s cut its credit rating on Italy to A/A-1. Investors are concerned about the government debt in large economies such as Italy and Spain. [Italy Downgrade]

Vanguard European ETF

Tisha Guerrero contributed to this article.

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