At 7:04 a.m. EST, the FTSEurofirst index index of top European shares was down 5.1 percent at 1,289.42 points, having earlier hit 1,280.94, a level not seen in eighteen months.
The sell-off tracked global equities losses, as the MSCI's main index of world stocks hit its lowest level in over a year.
Banks were the worst sector, contributing a quarter of the index's losses. And heavyweight energy stocks were among the top individual negative weights, with BP down 4.6 percent and Total 4.5 percent. Investors were left with little in terms of safe haven options: utilities, seen as a possible defensive hedge in times of strife, also fell, with Germany's E.ON sliding 6 percent.
Monday's fall is the index's eleventh drop in 14 sessions. It has already lost nearly 15 percent this month.
Germany's DAX .GDAXI plummeted 7.2 percent, while Britain's FTSE .FTSE slumped 5.3 percent and France's CAC 40 .FCHI slid 6.7 percent.
Insurers slid on fears over their bond exposure as investors sold off following news that a unit of Ambac Financial Group had lost a crucial "AAA" rating." Swiss Re sank nearly 10 percent, while Allianz lost 9.5 percent.
Banks took a beating again on Monday, with the DJ Stoxx bank index down 5.6 percent. HSBC fell 4.9 percent and Santander dropped 7.5 percent. Societe Generale which lost eight percent on Friday on market rumors that the French bank could report write-downs, lost a further eight percent.