Europeans woke with a hangover from 2011, when their continent plunged into its deepest economic crisis in decades.
Government leaders struggled to sound optimistic for the new year, with French President Nicolas Sarkozy warning Europe's financial struggles are not finished and "that 2012 will be the year full of risks, but also of possibilities."
Europe's largest economy, Germany, is expected to play a leading role in fixing mounting multi-billion-euro debts. Germany has been involved in desperate efforts to prevent the collapse of the 17-country monetary union.
In her New Year's address to the nation, German Chancellor Angela Merkel acknowledged she expects turbulence in 2012.
Speaking on national television, Ms. Merkel says overcoming these difficulties will not be without setbacks, but "at the end of this path Europe will emerge stronger from the crisis than before." She pledges to do everything to defend the European currency and to help solve the debt crisis. She says the euro has made "everyday life easier and the economy stronger."
The chancellor is to meet with President Sarkozy in Berlin this month to discuss revisions to Europe's fiscal rule book, with a final accord by European leaders on the German-French proposals in March.
EU members that do not use the euro also face economic and political uncertainties this year.
Among those worst hit is Hungary, after major credit agencies Moody's and Standard&Poor's downgraded its debt to the non-investing "junk" status.
In addition, many Western nations are concerned about Hungary's new constitution and laws introduced on New Year's Day. Critics claim they amount to a government take-over of the Central Bank, private pension funds, and other previously independent institutions.
In Budapest, Hungarians briefly tried to forget these worries.
Wearing 2012 eye glasses, parties erupted in downtown Budapest, with massive fire works and dancing crowds.
Yet elsewhere in town, thousands gathered in front of parliament to demonstrate against "the end of democracy." They included journalists who have been on hunger strike to protest alleged government interference in news programs.
Political analyst Peter Kreko of Budapest based research group Political Capital told VOA News Prime Minister Viktor Orban's policies have angered the International Monetary Fund and it is unlikely to provide a $26 billion safety net requested by Hungary.
“The outcome of this whole situation can be that we simply will not be financed by the IMF and the EU and it can have serious consequences for Hungary. There is just one escape route of the government. They expect that if we will not get a loan package that we can use the reserves of the Central Banks, but it can last for just a view more months," he said.
For some hopeful words, Catholics in Hungary and around Europe turned to Pope Benedict XVI, who marked the end of 2011 with televised prayers of thanks. He said humanity awaits the New Year with apprehension, but also with hope for a better future because "the Lord watches" and "takes care" of everyone.
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