The euro declined to a four-month low on Tuesday after new IMF Managing Director Christine Lagarde said the fund was not yet ready to discuss terms of a second Greek bailout, while equity markets tumbled on fears more countries will be engulfed by the eurozone's debt problems.

The London stock market tumbled more than two percent in early deals. The benchmark FTSE 100 index was down 2.12 percent at 5,802.42 points shortly before 0800 GMT.

Frankfurt's DAX 30 dived 2.69 percent to 7,038.96 points and in Paris the CAC 40 slid 2.36 percent to 3,717.70 points. The Milan exchange dived more than 4.0 percent and Madrid lost 3.75 percent, with indices pulled lower by sinking bank shares.

In Asia, Hong Kong shares closed down more than 3 percent in their biggest decline since the euro zone debt crisis first roiled markets last May. The benchmark Hang Seng Index shed 3.06 percent, or 684.07 points to 21,663.16 on turnover of HK$80.36 billion (US$10.30 billion).

Shanghai closed down 1.72 percent.

Australian share market suffered its biggest one-day fall in three weeks, with financials and consumer discretionary stocks leading broad-based declines as the European sovereign debt crisis spread to Spain and Italy.

Australia's benchmark S&P/ASX 200 closed down 1.9% at 4501.8 after hitting a nine-day low of 4491.7, on heavy volume.

Seoul tumbled 2.20 percent while Tokyo closed down 1.43 percent.

The European single currency meanwhile tumbled to a four-month low of US$1.3837 in London foreign exchange deals.

Eurozone members on Monday agreed to strengthen a multi-billion-dollar fund to prevent Europe's debt woes engulfing other states.

But investors are increasingly concerned that political leaders and bankers holding Greek debt talks in Brussels are unable to agree on how to avert an outright default by Athens.

Analysts fear that the Greek crisis might spread to heavily-indebted Italy and Spain -- Europe's third and fourth largest economies respectively.

channelnewsasia.com