--Investors nervous as last-ditch Greek coalition talks break down --Basic resources under pressure after China reserve requirement ratio cut --Euro slides against dollar; bund yields hit new lows --Eurogroup meeting eyed By Michele Maatouk Of DOW JONES NEWSWIRES LONDON (Dow Jones)--European stocks fell sharply Monday, the euro lost ground against the dollar, and bund yields hit new lows as investors scurried to safety, after the latest attempt to form a coalition government in Greece failed. Over the weekend, the leader of Greece's radical left party Syriza, Alexis Tsipras, rejected calls to join a coalition, saying he wouldn't support New Democracy or Pasok in a pro-austerity government. A majority could be formed with the smaller Democratic left party, however they have made it clear they won't take part in a coalition without Syriza. Talks are set to resume Monday, although Syriza isn't expected to attend and new elections in June now look like the most likely scenario. At 0805 GMT, the 10-year bund yield was down five basis points at 1.468%. At the same time, the 10-year Spanish bond yield was above the critical 6% level again, up 17 basis points at 6.16%, according to Tradeweb--its highest level since early December. Meanwhile, Spanish default protection costs hit a fresh record high. Investors remain concerned about Spain's financial system, after the government outlined new plans last week to force its banks to take on an extra EUR30 billion of capital to cushion themselves against bad loans. In oil markets, June Nymex crude oil futures were down $1.36 at $94.76 a barrel, falling below $95 a barrel for the first time since December. The benchmark Stoxx Europe 600 index was 1.5% lower at 248.20. The U.K.'s FTSE 100 Index was down 1.5% at 5493.78, Germany's DAX was down 1.7% at 6467.50 and France's CAC 40 Index was off 2.1% at 3065.42. In the euro-zone 'periphery,' Spain's IBEX-35 index was down 2.7% at 6806.20, while Greece's ASE Composite was 3.4% lower at 591.14. In currency markets, the euro was fetching $1.2882, from $1.2919 late Friday in New York, while the dollar was at Y80.18 from Y79.94. Banks paced the decline Monday, with the Stoxx Europe 600 index for the sector down 2.4%. Basic resources were also under pressure amid worries about slowing demand from China, after the central bank said it will lower the reserve requirement ratio for banks by 50 basis points as of May 18. The Stoxx Europe 600 resources index fell 2%. Investors are increasingly fearful of Greece exiting the euro, as euro-zone officials and members of the European Central Bank's governing council talk explicitly about the possibility and consequences of such an event. As it stands, opinion polls suggest a surge in support for the anti-bailout Syriza party. "A second election would put program implementation on hold, delaying the first mission review of the program scheduled for June and also put Greek budget financing under strain," said Deutsche Bank. And it isn't just the Greek political landscape that is shifting. German Chancellor Angela Merkel suffered a major blow Sunday night after voters in Germany's biggest region, North Rhine-Westphalia, rejected her austerity policies, raising doubts that her government can stay in power after next year's general election. According to early exit polls, total votes for the Christian Democratic Union dropped to about 26% from 35%, while the left-leaning Social Democrats and the Greens got a majority of around 51%. As the Greek political saga rumbles on, investors will watch for any developments at the Eurogroup meeting of euro-zone finance ministers in Brussels later Monday. Ministers are expected to discuss the situation in Greece, and how to keep it from spreading to the rest of the region. France and Spain are also likely to be on the agenda, as well as the broader economic outlook for the euro zone. In terms of economic data, the calendar is pretty bare, with no major U.K. or U.S. releases due. Euro-zone industrial production is at 0900 GMT. Results of an Italian auction of up to EUR5.25 billion in bonds are due shortly after 0900 GMT. Spain is due to sell up to EUR3 billion of 12-month and 18-month treasury bills, with results due shortly after 0830 GMT. Among commodities, spot gold was at $1571.90 a troy ounce, down $7.80 from New York, while and June Brent futures were down $1.08 at $111.18. The June bund contract was up 47 ticks at 143.24. -By Michele Maatouk, Dow Jones Newswires; +44-20-7842-9447;

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