LONDON, June 29 (Reuters) - European shares took a hammering in early deals on Monday, with Southern European banks especially badly hit, after Greece closed its banks and imposed capital controls as a result of its debt problems.
Portugal's PSI-20 benchmark share index sank 5 percent, worse than a 3 percent drop in the pan-European, blue-chip FTSEurofirst 300 index.
Germany's DAX and France's CAC both fell by around 4 percent, while the euro zone's blue-chip Euro STOXX 50 index also declined by a similar amount - marking the Euro STOXX's worst one-day percentage loss since late 2011.
After bailout talks between the leftwing government and foreign lenders broke down at the weekend, the European Central Bank froze vital funding support to Greece's banks, leaving Athens with little choice but to shut down the system to keep the banks from collapsing.
Greek banks will be closed and the Athens stock market shut all week. There will be a daily 60 euro limit on cash withdrawals from cash machines, which will reopen on Tuesday.
"The risk of a 'Grexit' (from the euro zone) is rising and uncertainty is increasing as we enter the uncharted territory of default, deposit controls and payment in IOUs," Goldman Sachs wrote in a note on Sunday. (Reporting by Sudip Kar-Gupta; Editing by Lionel Laurent)