* Euro weakens as euro zone ministers wrangle over Greek aid
* World stocks retreat with European banks under pressure
* U.S., German government bonds rebound
* Oil falls on stronger dollar, U.S. gasoline stocks
By Emelia Sithole-Matarise
LONDON, June 15 (Reuters) - European equities and the euro fell on Wednesday and safe-haven government bonds rose as divisions between euro zone officials over a new aid plan for debt-laden Greece curbed appetite for risky assets.
Worry about lack of substantive progress towards a blueprint for tackling the euro zone debt crisis kept investors on edge, pushing Greek, Portuguese and Irish bond yields to their highest levels since the introduction of the euro in 1999.
Striking Greeks raged against a new wave of austerity after euro zone finance ministers failed to agree how to make private creditors contribute to a second bailout for their indebted country. [ID:nLDE75E0JC]
This put the onus on the leaders of Germany and France to forge a deal later this week. [ID:nLDE75D0G6]
Selling pressure on the euro also increased after Moody's
put BNP Paribas
That warning depressed European banking stocks, pushing the FTSEurofirst 300 <.FTEU3> index of top European shares 0.2 percent lower.
"At some stage they (EU politicians) are going to have to grasp the nettle (on Greece). A lot of that is dependent on the banks being strong enough to take the hit," said Justin Urquhart Stewart, director at Seven Investment Management. "The euro is damaged -- the people operating it don't want to change it."
The euro fell nearly one percent against the dollar, sending it close to a recent low of $1.4285 hit on trading platform EBS.
It was last 0.9 percent down at $1.4312
"The market is definitely getting jittery about Greece, and rating agencies looking at European bank exposure to Athens is not going to help," a London-based trader said.
The euro also inched back towards a record low against the Swiss franc
SOUR MOOD
World stocks as measured by MSCI <.MIWD00000PUS> fell 0.4 percent, with some strategists saying more weakness could be in store for European shares.
"The easiest way for markets to deal with uncertainty is to go down," said Philip Isherwood, European equities strategist at Evolution Securities.
The sour mood in equities prompted gains in safe-haven U.S. and German government bond prices, pushing 10-year T-note yields about two basis points lower to 3.082 percent with equivalent Bund yields
The yield premiums of Greek, Portuguese and Irish bonds over benchmark German Bunds hit euro-era peaks and the cost of insuring the debt scaled record highs on a lack of political consensus on how to resolve Greece's debt problems.
"Hopes get dashed more and more that we won't get a waterproof solution by the end of next week. This is placing another big layer of uncertainty over everything and it sounds like you don't want to be that much invested in the periphery at the moment," said Commerzbank strategist David Schnautz.
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Euro zone debt struggle (package of graphics)
http://r.reuters.com/hyb65p
Return on Euro zone bonds http://r.reuters.com/fet99r
Graphic showing S&P sovereign credit ratings vs. CDS prices
http://r.reuters.com/vyc22s
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Dollar strength against a basket of currencies pushed oil
prices lower, with Brent crude oil for August delivery
Oil was also on the back-foot on rising gasoline stockpiles in top consumer the United States, which signalled fuel demand was stalling.
Gold slipped as a stronger dollar prompted some selling but the euro zone sovereign debt concern curbed further falls.
Spot gold