Intensifying anxiety over Greece sent European stock markets lower Tuesday, with the new government set on a collision course with creditors over plans to renegotiate its enormous bailout, analysts said.
London's benchmark FTSE 100 index of top companies fell 0.43 percent to 6,823.10 points, as investors also digested data showing Britain's economic growth slowed to 0.5 percent in the fourth quarter of 2014.
Elsewhere, Frankfurt's DAX 30 shed 0.58 percent to 10,735 and the CAC 40 in Paris lost 0.66 percent to 4,644 points compared with Monday's close.
- Greece 'leaving behind austerity' -
The Athens stock market plunged by another 2.81 percent, having tumbled 3.2 percent the previous day on news that anti-austerity party Syriza won the Greek election over the weekend.
However, Europe's main indices had mostly risen on Monday, shrugging off fears of a Greek eurozone exit or so-called Grexit.
Later on Tuesday, New Greek Prime Minister Alexis Tsipras will unveil his anti-austerity coalition administration, bringing together his radical left-wing party with the nationalist right, after a stunning election win that sent shockwaves through Europe.
Tsipras declared Sunday that Greece is "leaving behind disastrous austerity" and the so-called troika of creditors "is finished", in reference to the country's international lenders the European Union, the International Monetary Fund and the European Central Bank.
"The Greek elections might be over but markets remain preoccupied with what the new government will do next, conscious that a stern test of the eurozone's commitment to stay together could be just round the corner," said analyst Connor Campbell at trading firm Spreadex.
- 'Limited' contagion risks -
He added: "Syriza appear to be creating a 10-minister cabinet that is diametrically opposed to what (the) troika and the eurozone would want from Greece, and the reality of this is finally making itself felt on the markets today."
Syriza are the first anti-austerity party to govern in Europe, but they fell two seats short of a 151-seat majority in parliament and were thus forced to forge a coalition with the small right-wing Independent Greeks (ANEL) party.
In foreign exchange activity on Tuesday, the European single currency rose to $1.1307 in London deals on Tuesday, having hit Monday an 11-year low of $1.1098 on fears Greece could leave the eurozone.
"Difficult negotiations lie ahead to agree on a follow-up bailout with Greece’s troika creditors," added Citi analyst Ebrahim Rahbari in a note to clients.
"In our view, it is likely that an agreement will eventually be found due to the strong mutual incentives of the Greek government and its eurozone creditors to avoid the worst-case scenarios of Greek government default or Grexit, but an agreement requires significant concessions by both sides, so the negotiations will likely be lengthy and could fail."
Rahbari added: "We consider the near-term contagion risk to other eurozone countries to be limited, but political risks in the eurozone are rising more broadly."
Most Asian stock markets climbed Tuesday on hopes Greece's new government will be able to negotiate a bailout deal with the EU and IMF that will prevent it from leaving the eurozone.