During European afternoon trade, the EURO STOXX 50 tumbled 1.24%, France’s CAC 40 slumped 1.07%, while Germany’s DAX 30 dropped 0.96%.
Sentiment remained under pressure after Reuters reported earlier that Spanish Prime Minister Mariano Rajoy remains uncertain about asking for help from the ECB's new bond-purchasing program, which would mean signing up to a permanent bailout fund.
Spain's government faced protests over the weekend against public spending cuts, even as Madrid told its European partners that its next steps to overhaul the economy would avoid further cuts in public spending.
Spanish concerns overshadowed data earlier showing that the ZEW Centre for Economic Research's index of economic sentiment for Germany improved more-than-expected in September, ticking up to minus 18.2 from a reading of minus 25.5 the previous month, while the euro zone's index rose to minus 3.8 from minus 21.2, beating expectations for a reading of minus 16.5.
Financial stocks pushed lower, led by Italian lenders Intesa Sanpaolo and Unicredit, down 4.76% and 3.34%, while Spain's BBVA and Banco Santander tumbled 3.33% and 2.40% respectively.
Germany's Deutsche Bank and Commerzbank were also sharply lower, with shares plunging 3.76% and 4.26%, while French banks Societe Generale and BNP Paribas dropped 3.68% and 1.89%.
Elsewhere, auto stocks remained on the downside after a report earlier showed that European car sales fell 8.5% in August, posting an 11th consecutive monthly decline. German groups Volkswagen and BMW plunged 2.57% and 2.53%, while French manufacturers Renault and Peugeot plummeted 3.37% and 4.94%.
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