Europe's main stock markets slumped in early trading on Tuesday, with investors running for cover as Italy faced political deadlock following crucial elections in the indebted eurozone nation.
Milan's FTSE Mib index plunged 4.43 percent to 15,627 points with a stalemate in Italy's parliament between right and left after a critical vote in which the real winner may be a new protest party calling for a referendum on the euro.
Elsewhere, London's benchmark FTSE 100 index dropped 1.49 percent to 6,260.36 points, Frankfurt's DAX 30 retreated 1.17 percent to 7,682.24 points and in Paris the CAC 40 plunged 2.79 percent to 3,617.63, as shares in European banks tumbled.
Madrid's main index dived 3.0 percent on fresh fears of eurozone instability, traders said.
"Share markets and bank stocks in Europe are sliding as investor sentiment is rattled by the political impasse in the Italian elections," said Ishaq Siddiqi, market strategist at ETX Capital trading group.
Democratic Party leader Pier Luigi Bersani and his leftist coalition scraped a razor-thin victory in the lower chamber of parliament. They won just 29.55 percent to 29.18 percent for Silvio Berlusconi, with 99.9 percent of the ballots counted.
The victor's bonus will give the left a handy majority in the lower house, the Chamber of Deputies.
But in the 305-seat Senate, preliminary results from the interior ministry showed Berlusconi's coalition could win 110 seats to the left's 97 seats, with neither group winning a majority.
A majority in both chambers of parliament is required to form a government, leaving Italy in a state of limbo with a hung parliament that is unprecedented in its post-war history.
"With the Italian elections delivering the worst possible outcome for investors, equity markets have reacted swiftly and severely -- giving up yesterday's gains and more," Rebecca O'Keeffe, head of investment at Interactive Investor, said in a note to clients.
"The risks in Europe remain significant and we are likely to see increased volatility in the weeks ahead," she added.