A deepening crisis in Greece hit global markets on Monday, as the country imposed capital controls ahead of a national referendum on creditors' bailout conditions this weekend.
Uncertainty surrounding the country's economic future dragged equity markets lower. The pan-European Stoxx 600 tumbled 2.6 percent. Both Germany's DAX and France's CAC closed more than 3 percent lower having unwound some of their losses.
"Although some of the initial reaction in the markets to the decision by the Greek authorities to hold a referendum has been unwound, there is plenty of scope for renewed volatility in the event of a near-term Grexit, the risk of which we think probably now exceeds 50 percent," John Higgins, chief markets economist at Capital Economics, said in a note.
Greece's main stock exchange is expected to remain closed all week - along with the country's banks - although there were some reports late on Monday that Greek banks could open on Thursday.
Still, the worsening crisis in Greece hit banking stocks elsewhere in Europe hard on Monday. Portugal's Banco Comercial Portugues slid more than 9 percent, while Italy's Banca Monte Dei Paschi Di Siena (BMPS) lost more 7 percent of its value.