* World stocks upended as concern over Greece debt lingers
* Euro slide extended, trading at lowest in a year
* Central bank rate policy may reinforce dlr strength
By Jeremy Gaunt and Al Yoon
LONDON/NEW YORK, May 4 (Reuters) - Global shares and the euro dropped on Tuesday amid concern EU officials will not be able to stop the spread of the euro zone sovereign debt crisis.
The premium investors demand to hold bonds from other debt-laden European nations rose, despite a hefty aid package developed last weekend for Greece. The single-currency that ties 16 nations hit its lowest in a year.
World stocks as measured by MSCI <.MIWD00000PUS> fell 2.3 percent, dragged down by losses of 2 percent or more for indexes across Europe and the United States.
Investor skepticism about efficacy and implementation of a planned 110 billion euro aid package to Greece reasserted itself on the equity markets buoyed on Monday by other signs of global economic recovery.
"These measures were not delivered early enough to prevent Greece from being priced out of financial markets and considerable damage being done, which has made the longer-term adjustment even more difficult," HSBC strategist Phil Poole wrote in a note to clients.
In exchange for the aid, Athens has promised to carry out spending cuts and tax increases worth 30 billion euros over three years, on top of belt-tightening measures already taken.
A Moody's Investors Service official said the bailout does not mark the end of the country's fiscal crisis because the key is whether the country can adjust to meet the budget deficit targets it has agreed to.
U.S. shares declined at the open in New York, echoing drops in Europe that fully erased 2010's gains for one key index.
The Dow Jones industrial average <.DJI> fell 157.43 points, or 1.41 percent, to 10,994.40. The Standard & Poor's 500 Index <.SPX> slipped 18.55 points, or 1.54 percent, to 1,183.71 and the Nasdaq Composite Index <.IXIC> declined 57.93 points, or 2.32 percent, to 2,440.81.
Europe's FTSEurofirst 300 <.FTEU3> fell 2.3 percent to 1,040.44. Germany's DAX <.DAX> declined 2.1 percent, while Spain's IBEX 35 <.IBEX> slumped 4.6 percent. Japan's Nikkei 225 <.N225> rose 1.21 percent.
EURO SINKING
The euro tumbled to a one-year low beneath $1.31 amid worry that the financial drubbing endured by Greece will spread to other countries including Portugal and Spain. At mid-mornign in New York, the euro traded at $1.3054, down 1.05 percent.
Against the Japanese yen, the dollar
Investment advisers at RGE suggested that clients build short positions on the currency on any sign of strength.
"We believe the Greek crisis is only the tip of the iceberg," RGE said. "The debt sustainability problems in other euro zone countries are equally serious while the macroeconomic limitations are often more severe than in Greece."
The euro zone fiscal worries overshadowed signs of global recovery. U.S. stocks staged a broad rally on Monday that drove the S&P 500 <.SPX> to its best day in two months after manufacturing, consumer spending and construction data all instilled confidence in economic recovery.
Strong economic data also has reinforced views that the U.S. Federal Reserve could raise interest rates this year, boosting the dollar. Europe's debt woes are likely to keep euro zone rates on hold in 2010.
Benchmark government bonds from the euro zone's core and U.S. Treasuries gained as investors sought safer assets.
Two-year bond yields
Spreads between benchmark German Bunds and Portuguese and Italian bonds widened and the cost of insuring against a Greek default rose.
In energy and commodities, U.S. light sweet crude oil
(Additional reporting by Jessica Mortimer in London, and Steven C. Johnson in New York) (Editing by Theodore d'Afflisio)