European shares fell sharply on Monday as investors grew more concerned that Spain may need a full sovereign bailout after a second region indicated it would likely need government help.
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Euro zone banks fell 4.4 percent after Murcia looked set to follow Valencia in tapping a government programme to keep its finances afloat, while local media reported half a dozen region were ready to do likewise.
Shares in Italian banks were temporarily suspended from trading soon after the open as investors feared Italy would be the next country to run into trouble if Spain needed a full bailout. "It's very much risk-off this morning," said Central Markets senior broker Joe Neighbour.
"There are fresh concerns over Europe, but those concerns had never really gone away in the first place."
Spain's Ibex index was down 3.2 percent after recording its biggest daily slump in two years on Friday at 5.8 percent, while yields on the country's 10-year government bond hit a euro-era high. Many international investors have deserted Spanish and Italian debt, pushing yields to levels that Madrid cannot afford for long as it tries to save banks ravaged by a property market collapse and cut its spiralling budget deficit.
Sentiment was further undermined by worsening economic problems in Greece. Prime Minister Antonis Samaras said on Sunday, days before its international lenders arrive in Athens to push for further cuts, that the country was now in a "Great Depression" similar to the American one of the 1930s.
The FTSEurofirst 300 index was down 1.4 percent at 1,034.16 points at 0746 GMT while the euro zone's Euro STOXX 50 index shed 1.8 percent to 2,196.14 points. Charts on the euro zone blue chip index's September futures pointed to further downside after the contract fell 2.5 percent to 2,238 on Friday.
"Significant support between 2,208 and 2214 is going to be tested ... below which gap support is targeted at 2,168," Futures Techs technical analyst, Liam Roberts, said in a trading note.
Bucking the trend was Philips Electronics, the top riser in Europe as the region's largest consumer electronics producer reported higher revenues and profits in the second quarter, boosted by improved sales of hospital equipment. The European earnings season has got off to a good start, with 58 percent of companies that have reported so far - around one sixth of those due to do so - meeting or beating forecasts, according to Thomson Reuters StarMine data.