Europe's main stocks slid Monday, wiping out earlier gains, as the banking sector took a hit from concerns over Greece's unresolved crisis, dealers said.
London's benchmark FTSE 100 index of top companies shed 0.32 percent to 6,938.70 points in early afternoon deals.
In Paris, the CAC 40 index fell 1.17 percent to 4,935.20 points and Frankfurt's DAX 30 lost 0.46 percent to 11,396 points compared with the close on Friday.
Athens stocks shed 1.07 percent, while Milan dived 1.97 percent in value.
"Greek banks are running short on collateral and there are mounting concerns that the country may be forced to implement capital controls if a deal cannot be reached quickly -- which is weighing on sentiment and driving Greek equities lower and borrowing costs higher," said Rebecca O'Keeffe, head of investment at online stockbroker Interactive Investor.
Banking shares fell across Europe. Britain's Lloyds shed 1.27 percent to 87.87 pence in London, while Commerzbank dropped 1.75 percent to 12.32 euros in Frankfurt.
French pair Credit Agricole and Societe Generale saw their share prices slid 4.01 percent and 2.98 percent, to stand at 13.67 euros and 43.32 euros respectively.
Greece wants to reach a loan deal with its EU-IMF creditors by the end of May to resolve an acute cash shortage, the government said.
Greece's new radical Syriza-led government and its EU-IMF creditors have been stuck in a deadlock for four months over the reforms needed to release a final 7.2 billion euros ($8.2 billion) in bailout funds.
The delay has led to concerns Athens is running critically short of cash and may soon end up defaulting, which could set off a messy exit from the euro.
Over the weekend, Greek newspapers reported that the country came close to not making a 750-million-euro debt repayment to the International Monetary Fund last week.
- 'Important week' for Athens -
"This week really is an important one for Greece," said dealer Alistair Cotton at traders CurrenciesDirect.
"Reports out over the weekend suggest that it was a struggle for Greece to make its recent 750-million-euro payment to the International Monetary Fund, and it’s likely it won’t be able to pay the next instalment due on 5 June."
Around 1.5 billion euros are now due to the IMF in June, including 302.5 million euros on June 5.
"An EU leader’s summit on Thursday and Friday (21 – 22 May) might see the proposal of an extension to payment terms," added Cotton.
"More seriously for the euro, Greece’s failure to meet the 5 June deadline could trigger a general election – and the panic that would create is likely to result in the imposition of capital controls," he warned.
In foreign exchange activity on Monday, the European single currency fell to $1.1386 from $1.1446 late in New York on Friday.
Most of Asia's key markets diverged Monday following a strong end to last week and another record close on Wall Street.
Shanghai shed 0.58 percent and Sydney fell 1.33 percent, but Tokyo ended 0.80 percent higher and Seoul gained 0.34 percent.
Asian investors took a breather after Friday's rally across most indexes.
Friday's US gains came after more weak data indicating a recovery in the world's number one economy may not be as strong as thought, making an expected interest rate hike unlikely in the near future.