Germany's blue-chip Dax stock index has fallen by 4 percent after trading began in Frankfurt. Unease over debt drama in Greece weighed on shares one day before Athens is due to repay the IMF.
Just minutes after trading began, the German index shed 4.36 percent to 10,990.86 points. Also traded in Frankfurt, the Mdax lost 3.78 percent to 19,580.23 points.
Until recently, traders had been betting on Athens reaching a deal with its creditors. But over the weekend, Greek Prime Minister Alexis Tsipras abruptly announced that his country would hold a referendum in a week on whether to accept unpopular conditions on bailout loans.
Greek banks remained closed and capital controls were also imposed on Monday to stem an outflow of cash as worried depositors flocked to ATMs to withdrawl euros.
Share indexes in other European countries were down as well on Monday. The main share index in Paris was down 4.7 percent and Amsterdam's lost 4.1 percent as well.