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FTSE, DAX and CAC Seen Sharply Lower on Greek Debt Fears

European stocks are expected to fall sharply at the market open on Monday amid renewed fears about the euro zone debt crisis.

Trader at London Stock Exchange, England.
AP
Trader at London Stock Exchange, England.

FTSE -74
DAX -76
CAC -46

Asian stocks traded lower overnight with the Nikkei in Tokyo falling by close 2 percent as the euro traded below 1.36 against the dollar.

The losses follow a sell-off on Wall Street on Friday after Juergen Stark resigned from the European Central Bank (ECB). The German is said to have walked out after opposing the ECB buying up Italian and Spanish bonds.

Germany has put forward deputy finance minister Joerg Asmussen to replace Stark, a decision that was welcomed by the chair of the euro group, Jean-Claude Juncker.

Meanwhile, the Independent Commission on Banking said on Monday that the UK's banks should ring-fence their retail operations from riskier investment banking and increase their capital requirements beyond what is required by the Basel III directives.

The ICB said its proposed reforms could result in a pre-tax cost of between 4 billion pounds ($6.4 billion) and 7 billion pounds for Britain's banks.

The news flow over the weekend did little to shore up confidence in the European debt crisis, although Greece did announce a new property tax which Athens hopes will raise 2 billion euros ($2.7 billion). The tax was welcomed by the European Commissioner for Economic and Monetary Affairs, Olli Rehn, and is expected to help Greece in talks over its next tranche of aid with the IMF.

On Sunday Der Spiegel reported that Germany's finance ministry is studying the potential impact of a Greek default and looking at scenarios which include Greece leaving the euro and defaulting in a disorderly way.

On Saturday one of Angela Merkel's coalition partners and Economy Minister, Philipp Roesler, said an order bankruptcy by Greece is no longer a taboo.

Greece will announce a new tax on real estate to make up for fiscal slippage and meet this year's deficit target, a government official told Reuters on Sunday.

Angela Merkel will meet with European Commission president Jose-Manuel Barroso in Berlin later Monday to discuss the Greek situation.

In Italy Silvio Berlusconi's revised austerity program will be debated in the lower house of parliament ahead of a vote later this week.

This week also sees a 3 month deadline for Moody's to announce whether it will downgrade the French banks. A downgrade could come this week amid renewed fears over Greece, Reuters reported over the weekend.

In London the final proposals from the UK's Independent Banking Commission will be published. CNBC's Louisa Bojesen will report from Westminster, London, on the results.