LUXEMBOURG – Eurozone nations Monday started setting up a massive bailout fund that could rescue any member of Europe’s currency union from default, aiming to soothe market jitters that have sent the euro to a new four-month low against the dollar.

The “shock and awe” financial rescue package from the European Union and the International Monetary Fund will total $1 trillion — money that can be lent to any indebted eurozone nation risking default, and intended to counter investor fears that Spain, Portugal or others could follow Greece in requiring a bailout to meet debt repayments.

The special-purpose vehicle to borrow up to $526 billion will be ready this month, when countries formalize debt guarantees for some 90 percent of the package, said Luxembourg Prime Minister Jean-Claude Juncker, who led Monday’s talks between eurozone finance ministers.

Another $72 billion managed by the EU’s executive commission “is available to cover urgent financial needs were it to arise” in the meantime, he said, while the International Monetary Fund will provide another $298 billion.

Germany, which will provide the largest chunk of the EU fund, has pressed other eurozone countries to make big budget cuts to reduce the chances of them needing a bailout.

Markets “want to see not only actions but deeds” to shore up the currency, German Finance Minister Wolfgang Schaeuble told reporters.

German Chancellor Angela Merkel vowed to “set an example” Monday by laying out plans to save $95 million through 2014 by reducing handouts to parents, cutting 15,000 government jobs and delaying projects such as the construction of a replica of a Prussian palace in Berlin.

Juncker said eurozone finance ministers wanted Spain and Portugal to build on current “significant and courageous” spending cuts with further efforts “needed beyond 2011 together with further progress” on structural reforms, such as changes to pensions, welfare or labor systems.

EU Economy Commissioner Olli Rehn warned that they and others may need to prepare more budget reductions. He did not name which other countries should take action.