Fresh fears of a default by Greece sparked fresh turmoil on the financial markets this morning.
Milan stocks drop more than 4%
Milan's stock exchange dropped by more than 4.0 percent early today on a surge of concern that Greece could possibly default on its debt, and amid a sharp worsening of the eurozone crisis.
The FTSE Mib was down 4.07 percent at 13,499 points in mid-morning trading.
With bank shares suffering, Unicredit was suspended after its shares had dropped 7.53 percent while Intesa Sanpaolo was down 5.63 percent.
Other shares were also hit: the cement manufacturer Buzzi Unicem was down 5.47 percent and auto giant Fiat lost 4.69 percent.
Milan's benchmark FTSE Mib had suffered severe losses on Friday, plunging over 4.93 percent.
As well as concern over the two Greek rescue schemes, markets are also worried about slowing economic growth in the United States and in Europe.
Official data for Italian industrial production in July showed an unexpectedly big drop, the third fall in a row.
French stocks drop 4.27%, top bank shares down 10.0%
The French stock market plunged by 4.27 percent in early trading and shares in BNP Paribas, Credit Agricole and Societe Generale banks were down by about 10.0 percent.
The main CAC 40 index was down to 2,847.64 points, and banks were hard hit by concern that Moody's credit rating agency might downgrade their ratings because of the amount of Greek debt bonds they hold, traders said.
The CAC 40 already fell 3.60 percent on Friday and was dragged down further on Monday with BNP Paribas losing 11.31 percent, Credit Agricole 10.35 percent and Societe Generale 9.46 percent.
Moody's Investors Service is to issue a report mid-September on a possible downgrade of the banks' ratings.
"Fears that Moody's will downgrade French banks appear to have been reinforced. A decision could be taken in the coming days," analysts from Credit Mutuel-CIC said.
Despite the collapse in banks' values, Industry Minister Eric Besson excluded the possibility of partially nationalising French banks.
"It seems totally premature and not the point today to raise this possibility," Besson told RMC/BFM TV.
Yields on German, US 10-year bonds falls to record low
The cost of borrowing for Germany and the United States for 10 years fell to historic low points, as funds flew to safety from the Greek debt crisis, traders said.
The yield or interest rate indicated by the price of German 10-year bonds fell to 1.709 percent from 1.770 percent at the close of trading on Friday, and the yield on 10-year US treasury bonds was at 1.877 percent from 1.918 percent.
Swiss stocks plunge
Swiss stocks plunged more than 3.0 percent in morning trading, also on renewed concerns that the eurozone debt crisis is worsening because of new pressures on Greece.
The Swiss Market Index was down 3.07 percent to 5,263.97 points, with banks leading the fall.
Asian shares tumble
Earlier in the morning Asian stock markets slumped while the euro dived to a 10-year low against the yen, also because of fears that Greece would default on its debt repayments.
Big losses in Europe and on Wall Street on Friday fuelled the selling pressure, while the resignation of a key European Central Bank committee member also depressed sentiment.
Tokyo fell 2.31 percent, or 201.99 points, to a 29-month-low of 8,535.67, with exporters again feeling the most pain as the euro sank against the yen. After the closing bell Toyota's credit rating was cut by Fitch, which blamed the strong yen.
The euro hit 104 yen in Toyko trade, its lowest level since mid-2001, compared with 107.66 yen on Friday.
It also fell to $1.3560 from $1.3649 Friday. The dollar was lower at 76.80 yen against 77.58 yen.
The euro's weakness also weighed on other markets, with Hong Kong tumbling 4.21 percent, or 836.09 points, to 19,030.54, and Sydney ending 3.72 percent, or 156.2 points, lower at 4,038.5.
Singapore was off 2.71 percent in the afternoon.
Seoul, Shanghai and Taipei were closed for public holidays.
Greece -- which earlier this year was given the green light for a second bailout -- yesterday announced two billion euros in budget cuts demanded by the EU and the IMF for its rescue package to avoid a default.
EU economy commissioner Olli Rehn welcomed the move and said a team would head to Athens in the next few days to discuss a new tranche of Greece's first rescue package agreed in 2010.
However, European finance ministers are split over how to deal with obstacles holding up the second 160-billion-euro bailout for Greece, agreed in principle in July.
And Germany's Economy Minister Philipp Roesler pointedly said, in a column for publication on Monday, that Europe could no longer rule out an "orderly default" for Greece.
On Saturday, Der Spiegel magazine reported that the German government was preparing two contingency plans in the event of a Greek default.
Adding to the eurozone crisis was the resignation of Germany's European Central Bank executive committee member Juergen Stark, who was against the bank buying the bonds of under-pressure countries.
Bank watchers suggested his exit showed the ECB was deeply split over its approach to handling the sovereign debt crisis.
"It's very clear to us that this situation in Europe is not going to end well and the now plummeting euro is trying to tell you that some sort of Greek default and subsequent European bank recapitalisation programme is imminent," said Bell Potter managing director Charlie Aitken in Sydney.
Satoshi Tate, a senior dealer at Mizuho Corporate Bank, told Dow Jones Newswires: "We are watching Greece, and only Greece.
"Conditions are getting very serious and everyone is worried how the issue will unfold.
In other markets:
-- Manila ended 1.15 percent, or 50.02 points, lower at 4,296.05.
SM Investments fell 0.5 percent to 550 pesos, geothermal power producer Energy Development slid 0.8 percent to 6.10 pesos and Philippine Long Distance Telephone dropped 1.3 percent to 2,354.
-- Wellington closed 1.81 percent, or 60.12 points, lower at 3,263.81.
Fletcher Building dived 2.9 percent to NZ$7.65, Contact Energy slumped 3.1 percent to NZ$5.25 and Sky Network Television shed 2.6 percent to NZ$5.36.
But New Zealand Oil & Gas soared 4.4 percent to NZ$0.71.