European shares fell considerably and the euro hit a 22-month low against the greenback on Wednesday as European leaders gathered for the latest EU summit, after the Greek prime minister warned that his country might be poised for a eurozone exit.

"The market remains focused on the uncertain European situation, with today's European leaders' meeting doing little to ease market worries," said Nick Bennenbroek, an analyst at Wells Fargo Bank.

In Tuesday afternoon's trading, London's FTSE 100 index dipped 1.97 percent to 5,296.69 points, Frankfurt's DAX 30 sank 1.9 percent to 6,313.41 points and Paris' CAC 40 dropped 2.1 percent to 3,019 points. Milan was particularly badly hit: Italian shares fell by 3.25 percent.

The development seemed to pour cold water on earlier optimism that Europe's stock markets would be able to ride out the storms of regional economic uncertainty roused by the euro crisis: on Monday and Tuesday the stock markets had rallied after EU leaders vowed to beef up action to tackle the debt crisis and solid housing data was posted by the United States.

The euro also hit below the 1.26 US dollar mark on Wednesday for the first time since August 2010 .

But Germany's 10-year bond yields reached a record low of 1.39 percent, from 1.4 percent at the close of trade Tuesday, as investors sought out safe-haven assets.

sej/tj (AP,AFP)