London’s leading FTSE 100 index is down 2.18% to 6,605 in early trading. But the continent’s markets have been hit harder, with France’s CAC 40 opening 4.32% lower, and the German DAX down 4.05%.
In Tokyo the Nikkei 225 closed down 2.88% to 20,109. The Hong Kong Hang Seng fell 2.73% to 25,935. Sydney’s main market was down 2.16%.
The euro fell 1.5% against the yen to be worth 136.22 of the Japanese currency.
The markets are reacting to a decree by the Greek government in which it cited the “extremely urgent” need to protect its financial system due to the lack of liquidity after the ECB effectively cut off funding.
Cash withdrawals will be limited to €60 (£42; $66) a day for this period, the decree said, though this will not apply to holders of foreign bank cards, the BBC reports.
Athens is due to make a €1.6bn payment to the IMF on Tuesday – the same day that its current bailout expires.
Earlier talks between Greece and the eurozone countries over bailout terms ended without an agreement, and Prime Minister Alexis Tsipras then called for a referendum on the issue to be held on 5 July.
The parliament later ratified the plan to hold a referendum.
Greece risks default and moving closer to a possible exit from the 19-member eurozone.
Tsipras also said that Greek deposits were safe.
Greeks have been queuing to withdraw money from cash machines over the weekend, leaving a number of ATMs dry.
However, the decree said that the cash points would “operate normally again by Monday noon at the latest”.