Stock indexes in Europe and the United States fell sharply Tuesday as investors worried about the contraction of the economy in the 17-nation euro currency bloc and whether Greece can successfully eliminate a large portion of its debt.
Markets in London, Frankfurt and Paris fell about two percent or more after the European Union confirmed that the eurozone economy slid in the last three months of 2011, while New York exchanges dipped more than one percent.
The EU report came as Greece neared a Thursday deadline to secure agreements from its major private creditors to eliminate more than half of the money the country owes them, a $142 billion reduction. But there were signs that not all of the lenders would agree to the debt write-off, which could force the Athens government to impose losses on the reluctant creditors.
Greece is seeking to cut its debt as part of a pact with European leaders to secure a new $172 billion bailout, its second in two years, to avoid a default on its financial obligations later this month.
The EU's economic commissioner, Olli Rehn, said the eurozone "is currently in a mild recession." The region's economy dipped three-tenths of a percentage point in the October-to-December period and eurozone leaders say the slide is continuing in the early months of 2012. If the first quarter contraction is confirmed in the coming weeks, it would officially be the eurozone's second recession in three years.
Household spending, exports and imports all fell in the fourth quarter, but Rehn said there are "signs of stabilization." He said he is convinced that Europe's efforts to stem the effects of the continent's two-year governmental debt crisis will boost its economy "in the coming months."
For 2011 as a whole, the EU said the eurozone economy advanced 1.4 percent, down from 1.9 percent in 2010.
Numerous European governments have adopted austerity measures in an effort to trim their growing deficits. But higher taxes, and cuts in wages and pensions, have also diminished the eurozone's economic fortunes, with consumers reluctant to spend money on big ticket items.
Major automakers said January sales in Europe fell, with manufacturers now weighing the possibility of production cutbacks because of the glut of unsold cars. Fiat chief executive Sergio Marchionne said recently that very few car manufacturers make money in Europe.
Some information for this report was provided by AFP and Reuters.