NEW YORK SHARES

London stocks plunged lower on Wednesday ahead of an informal EU summit and after the former Greek prime minister warned that Greece might leave the eurozone.

The benchmark FTSE 100 index fell 2.53 percent to close art 5,566.41 points.

Sentiment was also tense after Germany reasserted its stance against eurobonds -- whereby strong and weak eurozone countries would pool their ability to borrow -- despite calls from other members and the IMF to consider this option.

"Today we have seen another leg of the downward trend as investors become anxious that the EU summit will not yield a solution to tackle the latest threats of the debt debacle," said Matthew Nelson, a sales trader with British-based spread-betting firm Spreadex.

"Even if a credible strategy does emerge from today?s meeting it is likely the markets will be nervy until the re-elections in Greece on the 17th June, offering short-term traders, such as spread bettors, an opportunity to trade the volatility."

Lloyds Banking Group (LBG) was the most traded stock, with 152 million shares changing hands, followed by Royal Bank of Scotland (RBS) with 103 million.

The day's biggest riser was medical devices company Smith and Nephew, which rose 0.42 percent -- or 2.5 pence -- to close at 594.5, followed by satellite broadcaster BSkyB, which added 0.36 percent -- or 2.5 pence -- to 693.

The biggest faller was Vedanta Resources, which dropped 9.12 percent -- or 95.9 pence -- to end at 951.5, followed by fellow mining giant Kazakhmys, which fell 7.86 percent -- or 58 pence -- to 679.5.

On the currency markets, the pound was trading at $1.5686 at 17:10 BST, down from $1.5763 at the same time on Tuesday, while it reached 1.2486 euros, up from 1.2387 over the same period.