Large Australian mining companies warned of the impact of worsening European debt crisis on their financial operations, particularly availability of credit.

BHP Billion (ASX: BHP) Chief Executive Marius Kloppers said the crisis could lead to bankruptcies in the European Union which could result in funding scarcity between banks and may compel Aussie mining firms to take a second look at their expansion plans and restrict their spending for the meantime.

"It does feel to me that the world is entering into the next phase of this whole contagion," Mr Kloopers told The Australian.

"All of the bankers I talk to think so (but) ... it's not playing into the newspapers as hard as I thought it would. The big thing we are going to look at very closely this week is whether the events of Friday start feeding through," he added.

Rio Tinto (ASX: RIO) Chief Executive Tom Albanese said that if the market deteriorates, the company would have to review all its projects and rank and prioritise them.

"As it goes longer and longer, it's having the effect of reducing prospects for economic growth in Europe and that's having knock-on effects around the world. But more importantly, it's having a crisis-of-confidence effect on the financial markets in Europe, which is going to certainly have lending restrictions on a global basis," Mr Albanese told The Australian.

The impact of the European debt contagion would also be felt by the Australian government which is relying on a rebound in the country's growth and tax rises to achieve its promise to return to a budget surplus in 2012.

Treasurer Wayne Swan is expected to announce on Tuesday budget cuts that factor in $20 billion losses arising from the European debt contagion.

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