Markets took another beating amid jittery trading on Monday as the hope of the political change in Greece and Italy was undermined with clear market tension that German Chancellor Angela Merkel highlighted saying the crisis is “toughest hour since World War Two.”

The relief from the announcement of a new government in Italy led by Mario Monti and the auction from Italy that drew strong demand were insufficient to ease jittery investors as the euro economy heads to recession and the crisis is far from over.

Merkel told her conservative party in Leopzig today that "Europe is in one of its toughest, perhaps the toughest hour since World War Two," as she expressed her fears over Europe that might fail if the euro fails and that she will do anything to stop that from happening.

Markets already cautious since the start of the session took the alarming warning from Merkel as further strain and fueled skepticism that leaders will be able to contain the crisis.

The EUR/USD extended the losses after Merkel and trading around $1.3643 down 1.20% supporting the dollar to surge higher on haven demand as the USDIX extended the gains to trade now around 77.32 higher by 0.53%.

STOXX 50 extended the losses and trading lower by 0.91% and Italian shares surrendered early gains with the FTSE MIB trading lower by 0.57% at 15688.64.