Greece's financial stability fund approved an 18 billion euro ($23 billion) injection of capital into the country's four biggest banks on Tuesday and will release the funds on Wednesday, a fund official said

Greek Euro Exit Being Considered: Former PM Papademos

Published: Tuesday, 22 May 2012 | 6:27 PM ET

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By: Reuters

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Photo: Louisa Gouliamaki | AFP Former Greek Prime Minister Lucas Papademos

Greece's financial stability fund approved an 18 billion euro ($23 billion) injection of capital into the country's four biggest banks on Tuesday and will release the funds on Wednesday, a fund official said.

At the same time, news reports quoted former Greece Prime Minister Lucas Papademos as saying that preparations for the country's exit from the euro zone are being considered.

Papademos said such a move was unlikely to materialize but the risk is real.

US stocks took a dive in the last hour of trading Tuesday, clipping a two-day rally, following the remarks from Papademos.

The euro [EUR=  1.2676    -0.001  (-0.08%)   ] extended losses against the U.S. dollar to trade more than 1 percent lower in late afternoon trade on Tuesday, which traders attributed to Papademos' comments.

"Sentiment is heavily against the euro," said Joseph Trevisani, chief market strategist at Worldwide Markets, Woodcliff Lake in New Jersey. "Any negative comment from former or current Greek officials sends the euro plummeting. There were also stop-loss orders below $1.2700 which accelerated the move down."

Investors also doubted whether an informal meeting of European leaders on Wednesday would yield much progress in tackling the region's debt crisis.

While there have been hopes that the summit may lead to agreement on measures to boost euro zone growth, investors were not confident of a breakthrough given apparent differences in opinion between Germany and France.

The Hellenic Financial Stability Fund (HFSF) said in a statement its board had unanimously approved the recapitalization of the banks, which would be signed on Wednesday by the HSFS, the banks and the European Financial Stability Fund (EFSF) . 

 http://www.cnbc.com/id/47524590