Fears over Greece knock Euro shares

The FTSEurofirst 300 index of leading European shares provisionally closed down 0.9 per cent at 1,013.64 points. The index is down around 3 per cent so far this month and is on track to post its worst monthly performance since the recovery started in March.

Banks featured among the worst performers. BBVA fell 6.4 per cent after it said its bad loans ratio rose nearly one percentage point in the fourth quarter from the third.

Greek banks Alpha Bank, Bank of Piraeus and National Bank of Greece fell 5.6 to 7.9 per cent.

"We cannot hold the gains which is not a good sign... Greece is a great problem," said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Frankfurt.

"If the uncertainty related to Greece is increasing then you see the dollar firm against the bunds. The strengthening of the dollar is correlated with falling markets."

The dollar rose to a six-month high against the euro on concerns over Greece's fiscal problems, while the spread of the 10-year Greek bond yield over benchmark German Bunds rose to its highest since Greece adopted the euro currency in 2001.

Investor sentiment was knocked after Greece denied press reports it had chosen Goldman Sachs to sell up to 25 billion euros of bonds to China.