Nov. 26 (Bloomberg) -- Greek stocks plunged, posting their biggest loss in more than a year and dragging the country’s benchmark index into a so-called bear market, as shares in the nation’s lenders slumped.

The ASE Index fell 6.2 percent to 2,225.32 at the close in Athens, the worst performer among 18 western European benchmarks. The gauge extended its fall from last month’s high to 23 percent. A bear market is generally defined as a drop of more than 20 percent. The FTSE/ASE 20 Index of the country’s biggest companies slipped 7.3 percent to 1,153.29. The Cypriot General Index plummeted 11.4 percent to 1,432.3.

European stocks slumped today the most in seven months after Dubai’s attempt to reschedule its debt rattled investors from Shanghai to London. Greek stocks have fallen from their peak this year on Oct. 14 on wider concerns about the country’s economy. EU finance ministers will reprimand Greece next week for failing to take “credible and sustainable” measures to reduce its budget deficit toward the EU limit of 3 percent of output, a draft document shows.

“There is sovereign risk in Greece that is spilling over to corporate risk,” said Francisco Salvador, co-strategist at Dexia Iberian equities in Madrid. “The public deficit and macro situation is worrying not only European authorities but investors too.”

National Bank

National Bank of Greece SA, the country’s biggest lender, fell 9.1 percent to 20 euros, the lowest since August. EFG Eurobank Ergasias SA, Greece’s second biggest bank, dropped 7 percent to 8.30 euros, a four-month low. Marfin Investment Group SA, the investment fund backed by Dubai Financial LLC, plummeted 9.7 percent to 2.15 euros, the steepest decline on the Dow Jones Stoxx 600 Index of European shares.

The premium that investors demand to hold Greek 10-year bonds instead of benchmark German bunds rose to the most since May 4. The difference in yield, or spread, between the securities was 201 basis points as of 4:16 p.m. in London.

Fitch Ratings cut the country’s credit rating a step and Moody’s Investors Service placed Greece on review for a possible downgrade last month following the government’s announcement that the budget shortfall this year will be more than four times the European Union’s 3 percent limit.

Significant revenue shortfalls and expenditure overruns “led to a strong deterioration in Greece’s budgetary position in 2009, which can only partly be attributed to the deterioration of the macroeconomic conditions,” according to the EU document, obtained by Bloomberg News. They are “mainly due to an insufficient response by the Greek authorities.”

The following stocks also rose or fell in Athens. Stock symbols are in parentheses.

Alpha Bank SA (ALPHA GA) sank 8.8 percent to 8.60 euros. Greece’s third-biggest lender raised 986 million euros ($1.48 billion) in a sale of new shares to existing shareholders after more than fully covering the offer, the chief financial officer said.

Forthnet SA (FORTH GA) advanced for a second day, rising 2.7 percent to 1.14 euros. The Greek provider of Internet, phone and pay-TV services said third-quarter earnings before interest, taxes, depreciation and amortization rose to 16.8 million euros from 4.3 million euros a year earlier, according to an e-mailed statement.

Hellenic Bank SA (HB CY) shed 5.8 percent to 1.14 euros, dropping for a sixth day. The third-biggest Cypriot lender said net income fell to 15 million euros from 56.7 million euros in the same period a year earlier as it increased charges for non- performing loans.

Sarantis SA (SAR GA) fell 8.1 percent to 4.40 euros, the biggest drop in five months. The Greek distributor of cosmetics and household goods said net income in the first nine months of the year fell to 11.6 million euros from 21.5 million euros in the same period a year earlier.

To contact the reporter on this story: Natalie Weeks in Athens nweeks2@bloomberg.net.

Last Updated: November 26, 2009 11:31 EST