European markets closed sharply lower on Tuesday on concerns that Greece's negotiations with its creditors will drag on without a viable debt plan.
The pan-European Stoxx 600 index finished around 1.5 percent lower, reversing gains seen earlier in the session .
Euro area heads of government met in Brussels on Tuesday to discuss the situation following the referendum in Greece.Greece reportedly did not submit new written proposals on Tuesday, but instead made an oral presentation—with a written version to come on Wednesday, a move which irritated finance ministers who had traveled to discuss a new deal.
"We listened to our new Greek colleage after welcoming him to the Eurogroup, his assessment of the situation and what the results of the referendum would mean for the Greek government. He has not yet presented new proposals, but he will first of all now send us quite quickly a new letter requesting for ESM support, and following that he will present proposals for the Greek side on what the substance would look like on which we will reach an agreement," Eurogroup President Jeroen Dijsselbloem said, following today's meeting.
The Belgian finance minister tells CNBC he is very disappointed by today's meeting. He said the only finance minister who does not feel a sense of urgency is Greece's.
In currency markets, the euro slipped against a stronger dollar, falling around 1 percent after the European Central Bank decided to keep Greek banks propped up with emergency funds, but made it harder for them to access the funds. Capital controls on Greek banks are also still in place.
U.S. stocks fell about 1 percent on Tuesday, with the S&P 500 falling below its 200-day moving average, as investors awaited developments in the Greece debt crisis.
The S&P 500 fell below that key level for its first time since October 20, joining the Dow Jones industrial average in negative territory for the year. The blue chip index is about 1.5 percent lower for the year, off more than 200 points on the day.
In individual stocks news, Rolls Royce fell close to the bottom of benchmarks, closing over 5 percent lower, extending Monday's selloff after the group's new CEO issued a profit warning which caused shares to fall as much as 9 percent.
European banks came under renewed pressure on Tuesday afternoon over concerns about their exposure to Greece. BMPS tanked to close around 7.5 percent lower, while Banco Popular finished around 4.5 percent lower. BBVA, Societe Generale both fell in the region of 2 percent.
The worst performer on the Stoxx 600 was energy company Technip after it announced a restructuring plan that would see 6,000 jobs axed. Shares in the French company tanked 8.7 percent.
Royal Bank of Scotland shares slipped 2.8 percent following a Reuters report that the British government was planning to sell half its stake in the lender worth £16 billion ($24.8 billion) within two years of a possible first sale in September.
U.K. retailer Marks & Spencer was also in the red after it reported that general merchandise sales had fallen 0.4 percent in the 13 weeks to June 27. Shares closed down around 2 percent.
On the data front, U.K. May industrial output was up 0.4 percent month-on-month, driven by strong oil and gas production, but manufacturing remained weak. Sterling which is currently down 1 percent against the dollar.