Global markets have tumbled ahead of the deadline for a crunch debt haircut deal between Greece and its bondholders.

The stricken state is trying to persuade private investors who hold its debt in government bonds to swap them for new bonds that are worth less and have a lower interest rate, in order to stave off a default.

It is vital for Greece to achieve the deal in order to cuts its debts down to the agreed level with the International Monetary Fund (IMF) which will hand over a bailout fund worth €130bn (£110bn) once Greece hits its debt target.

Asian markets fell amid fears that Greece would fail to secure a deal by the 8 March deadline. Japan's Nikkei 225 index and Hong Kong's Hang Seng both fell by 0.8 percent.

South Korea's Kospi dropped 0.7 percent.

US markets suffered their biggest fall of the year, with the Dow Jones shedding 1.57 percent and the Nasdaq losing 1.36 percent.

Britain's FTSE 100 lost 1.9 percent of its value, with Paris's CAC 40 tumbling 3.6 percent and Frankfurt's Dax shaving 3.4 percent off.

"Rumours that a slack participation rate by private investors in the Greek bond swap might force Athens to extend the deadline beyond 8 March are likely to keep investors at bay," IG Markets analyst Stan Shamu told Newsday.

"The last thing markets want to see is uncertainty."