The FTSE 100 sold off sharply in early trading alongside indices across Europe as fears over a break-up of the region swept across markets once again.
Despite assurances from leaders across Europe including French President Nicolas Sarkozy and German Chancellor Angela Merkel, investors can see little way for Greece to avoid exiting the single currency.
Although there was a rally last week following moves by central banks to provide additional liquidity in markets, this morning traders reverted to selling off positions.
By 9:30am, the FTSE 100 was 100 points, or 1.87%, to fall to 5,267.
French and German shares were hit even harder, with the Cac 40 off 2.4% at 2,959 and the Dax down 2.3% at 5,445.
The falls come after a mixed start to the week for Asia. While the Nikkei 225 made 2.3% or 195 points, closing at 8,804.2, the Hang Seng shed 2.6% or 497.47 points, plunging to 18,959.
All eyes will stay on Greece this week as its ability to avoid default hangs in the balance.
International monitors will assess whether Greek prime minister George Papandreou can meet the conditions of rescue loans already made to the country, after finance chiefs from the euro region last week warned that the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation.
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