European stocks endured their worst trading session in two months Wednesday as protests in debt-ravaged Greece and Spain turned ugly, making investors jittery.

Germany's DAX closed two per cent lower at 7,276.51 while the CAC-40 in France fell 2.82 per cent to 3,414.84. The FTSE 100 index of leading British shares was down 1.56 per cent at 5,768.09.

The euro traded down 0.23 per cent at $1.29 US.

Scenes of violent protests on the streets of Athens and Madrid added to a warning from the Bank of Spain that the country is in a deep recession and its economy continues to shrink "significantly,” both reigniting concerns over Europe's ability to implement the measures needed to deal with its big debts.

Traders also reacted to a joint statement issued Tuesday by Germany, the Netherlands and Finland that appeared to put at risk an agreement reached by European Union members in June to rescue the region’s troubled banks.

It said that troubled banks in Spain, Ireland and Greece will remain the responsibility of those governments.

People 'desperate and angry'

"Yesterday's anti-austerity protests in Madrid, together with today's 24-hour strike in Greece, are both reminders that rampant unemployment and a general collapse in living standards make people desperate and angry," said David Morrison, senior market strategist at GFT Markets.

"There are growing concerns that the situation across the eurozone is set to take a turn for the worse."

"The demonstrations remind us that central bankers cannot solve the crisis alone. The ECB's plan to intervene in sovereign bond markets can only succeed if governments in crisis countries can convince their electorates that ongoing austerity and reform are necessary to avoid bankruptcy," said Martin Koehring of the Economist Intelligence Unit.

"This, however, is increasingly challenging without the return of economic growth."

North American losses were more subdued, with Toronto’s S&P/TSX composite index down 24.32 points at 12,232.86 and the Dow industrial average in New York off 44.04 points at 13,413.51.

Yesterday, U.S. stocks suffered their biggest retreat in three months on comments from a leading official at the Federal Reserve, Charles Plosser, the president of the U.S. Federal Reserve's Philadelphia branch, indicated that the Fed's efforts to support the world's biggest economy would likely fall short of its goals.

The Canadian dollar, which rose to a 14-month high after the Fed move, has now fallen two cents against the American currency on the dismal news from Europe. It fell 0.48 of a cent to 101.50 cents US today.

Benchmark New York oil for November delivery closed down $1.39 lower at $89.98 US a barrel. Crude has fallen from near $100 since mid-September.

The December gold contract fell $12.80 to $1,753.60 and the December copper contract fell five cents to $3.71.

With files from The Canadian Press and The Associated Press