The euro declined against the dollar and yen on concern Greece's debt woes will raise borrowing costs for other countries in the region including Spain, which is due to sell bonds tomorrow.

The euro weakened versus the yen for a fifth day after China's Premier Wen Jiabao signaled developed nations should cut deficits and create jobs rather than relying on his country to bail out the world economy.

The euro has depreciated 1.4 per cent in the past month, the second-worst performer after the Swiss franc.

Meanwhile European shares retreated in early morning trade to hover near two-year lows, dragged down by financials.

The sell-off came after Moody's Investors Service downgraded ratings for French banks Societe Generale and Credit Agricole. The ratings company cut Societe Generale's debt and deposit ratings by one notch to Aa3 from Aa2 and said it was extending its review of the bank's C+ Bank Financial Strength rating.

Greek Prime Minister George Papandreou will hold a conference call with German Chancellor Angela Merkel and French President Nicolas Sarkozy today to discuss developments in his nation and the euro area.

Merkel, in a German radio interview broadcast yesterday, said that an "uncontrolled insolvency" would further roil markets spooked by the prospect of a Greek default. The euro region currently has no system for "orderly" insolvency until the permanent rescue fund is established in 2013, she said.

The so-called troika of the IMF, ECB and European Commission will return to Greece this week to review the nation's economy, the German chancellor said. Following the review the team will make a recommendation on the release of the sixth tranche of loans under a bailout secured in May of last year.

Bloomberg