The pan-European Stoxx 600 tumbled 1.14 percent by the provisional close, with all sectors in the region failing to post gains by the end of trade.
On the bourses front, the FTSE 100 slipped 1.08 percent, while the French CAC 40 fell 1.14 percent and the German DAX dropped 1.4 percent. Markets in peripheral Europe closed in the red.
The EU reiterated concerns over Italy's budget plans over the weekend, saying it is worried Rome's plans breach what it asked the country to do earlier this summer. In response, Italy said it would "not retreat" from its current spending plans.
The news appeared to ratchet up the pressure on the country's already fragile banking sector, with Unicredit, Ubi Banca and Banco BPM all trading down more than 3.5 percent each on Monday afternoon.
Looking at individual stocks, Norway's Norsk Hydro surged to the top of the European benchmark after the aluminum firm got a key permit to help it restart its Alunorte refinery at half-capacity. Shares of the Oslo-listed stock rose almost 4 percent on the news.
Tele2 jumped over 2 percent after the company confirmed that the European Commission had approved its merger with Com Hem Holding.
Chinese stocks in particular fell sharply after mainland markets opened for the first time in a week after the country celebrated Golden Week. Traders also digested purchasing managers' index (PMI) data out of China Monday, which showed a fast-growing services sector but rising cost pressures and lower employment.
Investors will be keeping an eye on U.S. markets on Monday amid fears of rising interest rates. Comments by U.S. Federal Reserve Chair Jerome Powell last week about the U.S. central bank's interest rate hiking path sent Treasury yields to multi-year highs.
And key nonfarm payrolls data showed a worse-than-expected increase in jobs — but a fall in the unemployment rate to 3.7 percent, the lowest level in almost five decades. The economic data, alongside Powell's comments, sent shares stateside lower Friday, with the S&P 500 posting its worst weekly performance since September 7. U.S. bond markets are closed on Monday, in light of Columbus Day; which provided some respite to Wall Street, as stocks traded mixed in the early part of the session.
Are we entering the beginning of a bear market for bonds?
Not a Scientific Survey. Results may not total 100% due to rounding.
However, surveys released by Deloitte and the British Chambers of Commerce on Monday showed that uncertainty is still weighing on British businesses, putting exports, recruitment and investments under pressure.