Italian banks, whose large government bond holdings makes them sensitive to political stress, fell 2.8 percent after Claudio Borghi, head of the lower house's budget committee, said Italy would be better off out of the euro zone.

Banks were the biggest sectoral fallers in Europe, helping drag the pan European STOXX 600 index down 0.6 percent to their lowest in more than two weeks. Strength among oil stocks on the back of rising crude prices helped limit the losses.

Shares in Royal Mail hit an all-time low, down 6.5 percent as brokers cut their price targets on the stock following a surprise profit warning on Monday due to worse than expected pressures on letter volumes and productivity.

The STOXX 600 has fallen 1.7 percent so far this year due to worries over a trade war between the US and China and concerns over political stability in the region.