In morning deals, London's FTSE 100 index slid 0.66 percent to 5,493.05 points, Frankfurt's DAX 30 dipped 1.42 percent to 5,902.08 points and the Paris CAC 40 lost 1.20 percent to 3,137.84.
The European single currency slipped to $1.3313 from $1.3384 late in New York on Friday.
"European markets awoke to a generally negative bias to risk assets this morning, with Moody's criticising the actions of eurozone leaders last week to the ongoing debt crisis as providing no new solutions," said Spreadex trader David White.
"Early trading today reflects this sentiment, as inflationary concerns are so far replaced with that of growth," he added.
Asian markets traded mixed on Monday as optimism over last week's European plan to introduce tougher fiscal rules to save the eurozone were weighed by lingering concerns leaders may not have done enough.
Traders remained nervous as Britain chose not to join the deal, while eyes will be on Standard & Poor's, which last week warned the eurozone of a downgrade if it is unable to come up with a viable plan.
Moody's meanwhile announced it would review ratings of all European Union nations early next year.
"In view of the continued absence of decisive policy measures despite the recent euro area summit, Moody's Investors Service is reiterating its intention to revisit the ratings of all EU sovereigns during the first quarter of 2012," Moody's said in a statement.
It added: "The absence of measures to stabilise credit markets over the short term means that the euro area, and the wider EU, remain prone to further shocks and the cohesion of the euro area under continued threat."
Standard & Poor's had last week warned the eurozone of a downgrade if it was unable to come up with a viable plan.
Moody's said last week's announcement by EU policymakers offered "few new measures".
"Market sentiment remains fragile despite last week's EU summit agreement," added Davy Stockbrokers analyst Conall Mac Coille on Monday.
"Top of the list of immediate concerns is the threat of downgrades by ratings agents of EU sovereign debt."
In earlier Asian trading, Tokyo rose 1.37 percent, Sydney finished 1.18 percent stronger and Seoul added 1.33 percent.
However, Hong Kong meanwhile closed flat and Shanghai lost 1.02 percent, weighed by lingering concerns over China's slowing growth.
On Friday, 26 of the 27 EU members backed tighter budget policing in a "new fiscal compact" to resolve the crisis threatening to crack apart the monetary union and send the global economy into another deep recession.The 17 eurozone nations signed up to the pact -- which gives the EU more power over national budgets -- while nine non-members "indicated the possibility to take part in this process" after consulting their parliaments.
However, Germany's hopes for a treaty revision were dashed when Britain's Prime Minister David Cameron opted out of the plan by using his veto, saying he could not get the protection he wanted for the London's financial centre.
Later on Monday, Cameron will tell parliament why he vetoed a new treaty, a move that has been cheered by eurosceptics in his party but triggered fury among Liberal Democrat coalition partners.
British investors will also focus this week on a batch of crucial economic data in the coming days.
"Despite this week being a key week with respect to the UK economy with inflation, unemployment and retail sales data due out, the main focus is likely to be on the after effects of the decision by Cameron to exercise Britain's veto on the proposed changes to the EU treaty," noted CMC Markets analyst Michael Hewson.
http://www.marketwatch.com/story/moodys-eu-sovereign-ratings-still-under-pressure-2011-12-12
