World markets fell Monday on concerns that Greece’s financial problems will not be solved by a tentative deal to cancel part of its debt, while European leaders met to find ways to revive the region’s ailing economy.

The leaders meeting in Brussels will likely focus on how to stimulate economic growth and create jobs at a time when huge government spending cuts threaten to push many countries back into recession.

Latest data showed that Spain was one step closer to recession — technically defined as two consecutive quarters of economic contraction — after its economy shrank in the last three months of 2011.

Experts say Europe’s efforts to cut its high levels of debt will be for nothing if its economies remain uncompetitive. The leaders will also discuss a new treaty on tightening budget controls and setting up a permanent bailout fund.

But the meeting will be dominated by another topic that is not officially for discussion — Greece’s debt problem.

Greece is said to be close to a deal with its private creditors that could avert a disastrous default this spring. Investors holding €206 billion ($272 billion) in Greek bonds would exchange them for bonds with half the face value. The replacement bonds would have a longer maturity and pay a lower interest rate. When the bonds mature, Greece would have to pay its bondholders only €103 billion.

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But because Greece has been in recession for years, some experts fear it could need more rescue loans from its bailout partners — other eurozone countries and the International Monetary Fund — if it is to remain solvent.

Richer countries like Germany, however, are losing patience with giving Athens loans, saying the Greek government is not implementing reforms and austerity cuts quickly enough.

A German official even proposed to have an EU official directly oversee Athens’ government spending. The idea was quickly rejected, however, by the European Commission and Greek leaders initially as well as by German Chancellor Angela Merkel at the summit on Monday.

Despite progress in Greece’s debt talks with private creditors, the continued uncertainty over its finances pushed markets lower Monday.

Britain’s FTSE 100 fell 1.2 percent to 5,664.19 and Germany’s DAX lost 1.3 percent to 6,430.16. France’s CAC-40 shed 1.4 percent to 3,272.71. Wall Street also fell on the open, with the Dow Jones industrial average falling 0.8 percent to 12,554 and the S&P 500 was down 0.9 percent to 1,303.

Sentiment, which has been relatively buoyant so far this year on hopes for a recovery in the U.S., was also dented by Fitch Ratings agency’s announcement late Friday that it had downgraded five eurozone countries, including Italy and Spain.

A bond auction by Italy saw the country’s borrowing rates drop, though demand was modest, while corporate were unremarkable — airline Ryanair beat expectations but electronics giant Philips disappointed.

In Asia, most indexes closed lower as investors there reacted to Friday’s release of data showing the U.S. economy grew more slowly than expected in the last three months of 2011. The U.S. economy grew at an annual rate of 2.8 percent in the October-December quarter, lower than the 3 percent that economists were expecting.

Japan’s Nikkei 225 index shed 0.5 percent to close at 8,793.05. South Korea’s Kospi was 1.2 percent lower at 1,940.55 and Hong Kong’s Hang Seng dropped 1.7 percent to 20,160.41. Australia’s S&P/ASX 200 lost 0.4 percent at 4,272.70.

Benchmarks in mainland China, Singapore, Indonesia, India and the Philippines also fell. Taiwan and New Zealand rose.

Japan’s Mitsubishi Electric Corp. plummeted 14.8 percent after the Defense Ministry and the Cabinet Satellite Intelligence Center said they would not sign contracts with the electric machinery manufacturer, which acknowledged it had overcharged on defense and space-related projects, Kyodo News agency reported.

Traders are awaiting more data this week for clues about which way the U.S. economy is headed. On Wednesday, the Institute for Supply Management will release its manufacturing index for January and the U.S. Labor Department will release monthly employment data Friday.

“Because the market has been expecting rather good economic data from the U.S. … I am afraid if those figures disappoint the market, it may trigger further correction in the stock market,” said Louis Wong, dealing director of Phillip Securities Ltd.

Benchmark oil for March delivery was down 54 cents to $99.02 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 14 cents to end at $99.56 per barrel on the Nymex on Friday.

In currencies, the euro fell to $1.3093 from $1.3208 late Friday in New York. The dollar fell to 76.57 yen from 76.72 yen.