Spanish government bond yields reached another euro-era record amid mounting fears that the eurozone's fourth largest economy will need a sovereign bailout along the lines of Greece, Portugal and Ireland.

The Stoxx Europe 600 Index slid 0.9% to 255.92 at 8:05 a.m. in London. The IBEX 35 index was down 3.75% while the FTSE MIB index 2.7%. The main stock indices in Germany, the UK and France were down ~1.5% each.

The euro weakened to the lowest level against the dollar since June 2010 today while falling to the lowest level in more than 11 years against the yen.

The yield on the 10-year Spanish government bond jumped 25 basis points to 7.46%, according to reports. The short end of the curve saw more damage, with the yield on the two-year benchmark shooting up half a percentage point to 6.08%.

Italian bonds were also under pressure, sending the yield on the country's 10-year bond up 0.23 percentage point to 6.37%.

The spread between German and Spanish 10-year yields widened by more than a quarter of a percentage point to 6.33%.

Trading in Italian bank shares were suspended on Monday morning after steep declines in share prices following concern about the eurozone debt crisis.

A spokesperson from Borsa Italiana confirmed that trade had been halted in shares of UniCredit SpA and Intesa Sanpaolo SpA, with the banks dropping 5% and 4.7%, respectively ahead of the suspension.

Trading was also suspended in Banca Monte dei Paschi di Siena SpA, Banco Popolare SC and Mediobanca Banca di Credito Finaziario SpA.

Spain revised down its GDP estimates for this year, next year and 2014, while reports also stated that the region of Valencia will ask the central government for financial assistance. A separate report said that the region of Murcia may also need aid, according to its president.

Spanish equities plunged and government bond yields soared on renewed fears that the country could be forced to seek a full-fledged sovereign bailout due to its debt burden. Italian government bonds also succumbed to pressure on Friday.

Investors were also disappointment with provisions of a bailout plan for Spanish banks approved by eurozone ministers. For now, liability for the package, which is expected to total as much as €100bn (US$123bn), remains with the Spanish government.