Stock markets and the euro fell sharply Friday after Greece's crucial bailout was put on hold by its partners in the 17-nation eurozone and the leader of a small partner in the country's coalition government said he would vote against the demanded austerity measures.
Just a day earlier, the feeling surrounding Greece was very different. Following weeks of discussions, the Greek government appeared to have done enough to pacify creditors.
Greek Prime Minister Lucas Papademos and heads of the three parties backing his government _ including George Karatzaferis who Friday railed against the deal _ agreed to deep private sector wage cuts, civil service layoffs, and significant reductions in health, social security and military spending.
Investors had breathed a sigh of relief Thursday that the agreement would allow Greece to get a euro130 billion ($173 billion) bailout package and avoid a bankruptcy next month that could send shockwaves around the financial markets.
But finance ministers from the other 16 eurozone states threw up a roadblock later in the day and insisted that Greece had to save an extra euro325 million ($430 million), pass the cuts through a restive parliament and guarantee in writing that they will be implemented even after planned elections in April. News that the leader of a small partner in Greece's coalition government would now vote against the austerity measures deepened the gloom on Friday.
The renewed fears of a Greek default, which could send shockwaves around the global economy, dented sentiment in the markets Friday.
In Europe, the benchmark index in Athens 3.3 percent down by late afternoon local time. The FTSE 100 index of leading British shares was down 0.8 percent at 5,846 while Germany's DAX slid 1.7 percent to 6,675. The CAC-40 in France was 1.4 percent lower at 3,379.
The euro was also hit hard, trading 0.7 percent lower at $1.3182.
In the U.S., the Dow Jones industrial average was down 0.9 percent at 12,769 while the broader Standard & Poor's 500 index fell the equivalent rate to 1,339.
The prevailing view remains that a deal will be cobbled together but the uncertainty is weighing on stocks. Once all the demands have been fulfilled, the eurozone will give Greece the green light to start implementing a separate bond swap deal with banks and other private investors designed to slice some euro100 billion ($132 billion) off Greece's debt load.
"For all the rhetoric, it is probable that a deal will still be reached because the consequences of not doing so would be so damaging for the EU as a whole," said Gary Jenkins, managing director at Swordfish Research.
However, it is possible that the Greek politicians "suffer from negotiating fatigue and decide that putting their people through the austerity measures are not worth it."
Earlier in Asia, Japan's Nikkei 225 index fell 0.6 percent to close at 8,947.17. Hong Kong's Hang Seng lost 1.1 percent to 20,783.86 and South Korea's Kospi dropped 1 percent to 1,993.71.
However, mainland Chinese shares edged higher with the benchmark Shanghai Composite Index gaining 0.1 percent to 2,351.98. The Shenzhen Composite Index also gained 0.5 percent to 903.64.
Oil prices tracked the bulk of equities around the world lower _ benchmark oil was down $2.11 to $97.75 per barrel in electronic trading on the New York Mercantile Exchange.
Terror Concerns: Obama Administration Extends Protected Status Deadline For New Somali Refugees | Katie Pavlich