Paris: The debt-stricken eurozone was back in the firing line on Tuesday after last week's EU summit deal afforded only a brief respite from wary financial markets and leaders warned of a two-speed Europe.

Ratings agency Moody's was first to turn the screw. It declared the crisis talks had failed to produce "decisive policy measures" and threatened to review the credit ratings of all EU states within the next three months.

Meanwhile, Italy edged through a bond test, but still had to pay an exceptionally high rate to borrow fresh money for only 12 months.

Traders watched nervously as Italy's commitment to austerity measures was tested by a nationwide strike and EU and IMF auditors began talks in Greece on the implementation of its latest debt bailout.

Asian markets had nudged upwards on hopes that the deal would draw a line under the crisis but Europe opened down as concerns returned, with investors focusing on the headlines after Britain vetoed a new treaty to tame the crisis.

In London, the FTSE 100 index of top shares fell 1.83 per cent to 5,427.86 points, in Paris the CAC-40 slumped 2.61 per cent to 3,089.59 points and Frankfurt's DAX 30 tumbled 3.36 per cent to 5,785.43 points.

Milan lost 3.79 per cent and Madrid was down 3.11 per cent.

The euro slid under USD 1.32 for the first time since the beginning of October, trading at USD 1.3189 at 2000 GMT (0130 IST) against USD 1.3384 late on Friday.

European leaders had hoped that Friday's agreement to move towards a fiscal pact, seeking to eradicate their public deficits under close EU supervision, would reassure markets nervous about their massive debts being repaid.

But on Tuesday they were also forced to admit that Britain's decision to stay out of the deal meant there was now a divided two-speed Europe.

French President Nicolas Sarkozy said he and German Chancellor Angela Merkel had "tried everything" to convince British Prime Minister David Cameron to sign the pact.

(Agencies)