European stocks slumped and the euro hit an eight-month dollar low on Monday after Greece said it would not meet a target for reducing its massive deficit, heaping fresh pressure on the eurozone crisis.

The Frankfurt market dived more than 3.0 percent and bank stocks tumbled on the first trading day of the fourth quarter after Greece said the budget deficit should drop to 8.5 percent of GDP in 2011, short of an earlier target.

The euro struck $1.3314 -- the lowest point since January -- before a meeting due on Monday of eurozone finance ministers to decide whether Greece should receive an eight-billion-euro loan installment.

"We've begun the fourth quarter in much the same way as we ended the third. European equities were under pressure from the open after falls in Asian Pacific markets overnight ... following news that Greece will miss yet another deficit target, said David Morrison, an analyst at GFT trading group.

"Although the major stock indices have managed to bounce off lower levels, they look vulnerable to further selling. Europe's leaders have no good choices, and continue to pretend that their problems will eventually be solved by stronger growth alone," he told AFP.

The acknowledgement by Greece on Sunday that it would miss its deficit targets raised further uncertainty over whether its fresh budget cuts would be enough for it to secure the next tranche of its multi-billion euro bailout.

Athens needs the payment to avoid bankruptcy next month.

The 17 countries that share the debt-challenged euro currency will meet in Luxembourg from 1500 GMT to review the situation.

After striking an eight-month low, the European single currency recovered slightly to stand at $1.3357, which compared with $1.3390 late in New York on Friday.

In stocks market trade, Frankfurt's DAX 30 was down 2.59 percent to 5,359.09 points, London's FTSE 100 slid 2.08 percent to 5,021.50 points and in Paris the CAC 40 dropped 2.06 percent to 2,919.64. Madrid lost 2.12 percent and Milan 1.82 percent in late morning deals.

Asian stocks plunged on Monday, with Hong Kong closing down 4.38 percent, Tokyo dropping 1.78 percent and Sydney shedding 2.78 percent.

World stock markets endured their their worst quarterly losses since the 2008 financial crisis in the three months to September 30, as investors dumped equities for safer assets on worries over a global recession.

"With stocks down and bonds up this can mean only one thing," said Simon Denham, analyst at Capital Spreads trading group.

"Traders are in no mood for taking risks as economic growth has shown a slow down and leaders assess what effect a potential Greek default would have on the growth of emerging economies.

"In line with the risk aversion, we are seeing the dollar remain as the safe haven option for traders," he added.

Shares in Franco-Belgian bank Dexia meanwhile plunged nearly 12 percent at the opening of trade on Monday following a downgrade warning by Moody's over concerns about its liquidity.

Other French bank stocks were hit hard by the warning by Greece that it would miss its agreed deficit targets, with shares in Credit Agricole and Societe Generale down nearly 7.0 percent and BNP Paribas nearly 9.0 percent.