* World shares sink on fears over Greece exit from euro
* Doubts over debt-crisis plan send euro to 21-month low
* Germany sells interest-free debt due to safety bids
NEW YORK, May 23 World stocks and the euro fell
o n W ednesday as investors shunned riskier assets on worries
about Greece's possible departure from the euro zone, which
would deepen the region's debt crisis and hurt an already
fragile global economy.
Each euro zone country will have to prepare a contingency
plan for the eventuality of Greece leaving the single currency,
three euro zone sources told Reuters, citing an agreement
reached by officials.
A scramble for low-risk investments enabled Germany to pay
no interest on a new two-year debt issue amid the absence of new
measures from a European leaders' summit in Brussels to tackle
the region's debt crisis.
"The markets are on edge and sensitive to every possible
out-of-control scenario coming out of Europe," said Peter
Boockvar, equity strategist at Miller Tabak & Co in New York.
Europe's leaders are expected to discuss boosting growth at
a meeting later o n W ednesday, as well as the idea of a joint
euro-zone bond. French President Francois Hollande supports the
bond plan, but German Chancellor Angela Merkel opposes it.
"Most are expecting no concrete solution out of the meeting,
just a few ideas discussed on how to boost growth with no real
commitment to carry them out, while Angela Merkel is almost
certain to reject any proposal by Francois Hollande in relation
to euro bonds," said Craig Erlam, market analyst at Alpari.
Perception of a stalemate between the head of the euro
zone's most powerful member and leaders of other bloc countries
unleashed selling of their common currency and shares worldwide.
The MSCI world equity index tumbled 1.7
percent to 298.10, close to the lowest level of the year set
The Dow Jones industrial average was down 131.46
points, or 1.05 percent, at 12,371.35. The Standard & Poor's 500
Index was down 12.49 points, or 0.95 percent, at
1,304.14. The Nasdaq Composite Index was down 20.65
points, or 0.73 percent, at 2,818.43.
The FTSE Eurofirst index of top European shares
lost 1.9 percent to 974.42, while the Nikkei index shed
2 percent to 8,556.60.
The euro fell 0.3 percent to 1.2643 after touching
$1.2613, its lowest level since August 2010.
The dollar index rose 0.3 percent to 81.74 after
touching 81.91, its highest since September 2010.
"The euro's downtrend is entrenched and we think there are
too many risks of potentially nasty outcomes in the euro zone,
especially with regard to what will happen to Greece," said Ned
Rumpeltin, currency strategist at Standard Chartered in London.
Fears about a Greek exit from the euro were stoked by former
Prime Minister Lucas Papademos, who said late o n T uesday that
Greece had no choice but to stick with a painful austerity
program or face a damaging exit from the euro zone.
Papademos' comments fed bidding for German and U.S.
government debt as investors sought low-risk investments.
The strong German Schatz auction lifted June Bund futures
91 ticks to 144.00, while benchmark U.S. Treasury
yields were around 1.72 percent, within striking
distance of the lowest level at least 60 years.
In the oil markets, signs of a potential deal between Iran
and the U.N.'s International Atomic Energy Agency to unblock
investigations of suspected work on nuclear weapons in the
oil-producing country sent Brent crude below $107 a barrel.
Brent last traded down $1.53 at $106.88, while U.S.
oil futures fell 73 cents to $91.12 a barrel.
Spot gold prices fell for a third straight session,
down 1 percent to $1,550.01 an ounce.