Unable to generate 125 Khz free running square wave...

#include <iom32v.h>
#include <macros.h>

void port_init(void)
{
 PORTA = 0x00;
 DDRA  = 0x00;
 PORTB = 0x00;
 DDRB  = 0x00;
 PORTC = 0x00; 
 DDRC  = 0x00;
 PORTD = 0x00;
 DDRD  = 0xFF;
}

//TIMER2 initialize - prescale:1
// WGM: CTC
// desired value: 125KHz
// actual value: 121.212KHz (3.1%)
void timer2_init(void)
{
 TCCR2 = 0x00; //stop
 ASSR  = 0x00; //set async mode
 TCNT2 = 0xE0; //setup
 OCR2  = 0x20;
 TCCR2 = 0x19; //start
}

//call this routine to initialize all peripherals
void init_devices(void)
{
 //stop errant interrupts until set up
 CLI(); //disable all interrupts
 port_init();
 timer2_init();

 MCUCR = 0x00;
 GICR  = 0x00;
 TIMSK = 0x00; //timer interrupt sources
 SEI(); //re-enable interrupts
 //all peripherals are now initialized
}

//
void main(void)
{
 init_devices();
 while(1)
 {};
}

#include <mega32.h>

// Timer 0 overflow interrupt service routine
interrupt [TIM0_OVF] void timer0_ovf_isr(void)
{
// Place your code here

}


void pin0(void)
{
#asm("NOP");
}

void pin1(void)
{
#asm("NOP");
}


//TIMER2 initialize - prescale:1
// WGM: CTC
// desired value: 125KHz
// actual value: 121.212KHz (3.1%)
void timer2_init(void)
{
 TCCR2 = 0x00; //stop
 ASSR  = 0x00; //set async mode
 TCNT2 = 0xE0; //setup
 OCR2  = 0x20;
 TCCR2 = 0x19; //start
}

//call this routine to initialize all peripherals
void init_devices(void)
{
 //stop errant interrupts until set up
 #asm("CLI"); //disable all interrupts
 timer2_init();

 MCUCR = 0x00;
 GICR  = 0x00;
 TIMSK = 0x00; //timer interrupt sources
 #asm("SEI"); //re-enable interrupts
 //all peripherals are now initialized
}


// Declare your global variables here

void main(void)
{
// Declare your local variables here

// Input/Output Ports initialization
// Port A initialization
// Func7=In Func6=In Func5=In Func4=In Func3=In Func2=In Func1=In Func0=In 
// State7=T State6=T State5=T State4=T State3=T State2=T State1=T State0=T 
PORTA=0x00;
DDRA=0x0F;

// Port B initialization
// Func7=In Func6=In Func5=In Func4=In Func3=In Func2=In Func1=In Func0=In 
// State7=T State6=T State5=T State4=T State3=T State2=T State1=T State0=T 
PORTB=0x00;
DDRB=0x00;

// Port C initialization
// Func7=In Func6=In Func5=In Func4=In Func3=In Func2=In Func1=In Func0=In 
// State7=T State6=T State5=T State4=T State3=T State2=T State1=T State0=T 
PORTC=0x00;
DDRC=0x00;

// Port D initialization
// Func7=In Func6=In Func5=In Func4=In Func3=In Func2=In Func1=In Func0=In 
// State7=T State6=T State5=T State4=T State3=T State2=T State1=T State0=T 
PORTD=0x00;
DDRD=0xFF;



// Timer/Counter 1 initialization
// Clock source: System Clock
// Clock value: Timer 1 Stopped
// Mode: Normal top=FFFFh
// OC1A output: Discon.
// OC1B output: Discon.
// Noise Canceler: Off
// Input Capture on Falling Edge
// Timer 1 Overflow Interrupt: Off
// Input Capture Interrupt: Off
// Compare A Match Interrupt: Off
// Compare B Match Interrupt: Off
TCCR1A=0x00;
TCCR1B=0x00;
TCNT1H=0x00;
TCNT1L=0x00;
ICR1H=0x00;
ICR1L=0x00;
OCR1AH=0x00;
OCR1AL=0x00;
OCR1BH=0x00;
OCR1BL=0x00;






{
 init_devices();
 while(1)
 {
 if(PIND.7==0)
    {
    pin0();
    }
 else
    {
    pin1();
    }
 };
}

// Global enable interrupts
#asm("sei")

/*while (1)
      {
      if(TIFR0 == 1)
      { PORTA.0=1;}
      else
      { PORTA.0=0; };
    
      };*/
}