At 10:25 am (0025 GMT), the benchmark S&P/ASX 200 was 113.8 points, or 2.71 percent, lower at 4,080.9, following a negative lead from US stocks on fresh European debt concerns.

Early losses on Wall Street accelerated on Friday after the unexpected news that the European Central Bank's chief economist, Juergen Stark, was resigning "for personal reasons".

Hours after his resignation was announced, Stark called for drastic reforms to the eurozone.

"It's an ugly start to the new week as European fears once again weigh on confidence and sentiment," said IG Markets strategist Ben Potter.

"With all US sectors finishing firmly in the red, it's likely to be broad-based losses for the local market."

The Australian dollar was also down at 104.08 US cents early in the session after risk aversion among traders spiked on rumours of a Greek default and Stark's resignation, analysts said.

It closed on Friday at 106.28 US cents.