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London - Global stock markets fell sharply Thursday amid fears that Greece's debt crisis is spiralling out of control and fresh worries over China's economy.
Investors are looking on in dismay at the chaos in Greece, as Prime Minister George Papandreou prepares to reshuffle his government to get austerity measures through Parliament. Two more Socialist deputies have quit their seats in the Greek Parliament.
On Wednesday, violent protests and the collapse of cross-party talks to form a coalition government to get broader support for austerity measures triggered big stock market losses around the world, bringing an end to an early-week rally.
"This turmoil had raised concerns over a delay to getting the next tranche of funds which could have left Greece without funds at some point in July, or possibly August," said Derek Halpenny, an analyst at The Bank of Tokyo-Mitsubishi UFJ.
In Europe, the FTSE 100 index of leading British shares was down 1.2% at 5 675 while Germany's DAX fell 0.8% to 7 056. The CAC-40 in France was 1.2% lower at 3 759.
Wall Street was poised for further losses, too - Dow futures were down 0.2% at 11 810 while the broader Standard & Poor's 500 futures fell 0.1% to 1 259.
The big worry in the markets is that a disorderly Greek debt default could heap massive pressures on the continent's banks, particularly if investors think that Greece's fellow bailout victims Ireland and Portugal will be next.
A European Central Bank official warned that the EU's crisis bailout fund would have to double to €1.5 trillion ($2.1 trillion) if Greece fails to pays its debts, spreading financial turmoil.
Nout Wellink told Dutch paper Het Financieele Dagblad that "if you fall through the ice you better have a very large safety net."
European officials are talking about more aid to keep Greece from defaulting but the political chaos has thrown everything into question. And the uncertainty has hit sentiment in markets around the world.
The euro has been a big casualty over the past couple of days, falling around four cents against the dollar. By late morning London time, it was trading at $1.41, just above its earlier three-week low of $1.4072.
Earlier in Asia, Japan's Nikkei 225 stock fell 1.7% to end at 9 411.28 while South Korea's Kospi fell 1.9% to close at 2 046.63. Hong Kong's Hang Seng dropped 1.5% to 21 953.11.
"The Greek problem is a mess. Everyone is worrying whether the Greek government will default," said Jackson Wong, a vice president at Tanrich Securities in Hong Kong. "Everything seems just very negative at this point."
Mainland Chinese shares slipped as liquidity was constrained by the central government's latest order to banks to raise the level of deposits they must hold as reserves, to a record 21.5%, as of June 20.
The Shanghai Composite Index fell 1.5% to close at 2 664.28 while the Shenzhen Composite Index fell 1.9% to end at 1 097.17. Shares in expressways and coal miners weakened.
Benchmark crude for July delivery was up 90 cents to $95.68 in electronic trading on the New York Mercantile Exchange on Wednesday. The contract fell $4.56 to settle at $94.81 on Wednesday.
