PARIS — Stocks fell sharply Monday as Italy’s borrowing costs spiked up to fresh euro-era highs and Greek politicians were putting the finishing touches to a new unity government.

Following last week’s turmoil, which was centered on worries that Greece was heading for an imminent bankruptcy, investor fears are now focused on Italy, the eurozone’s third largest economy.

Last week’s meeting of leaders from the Group of 20 was supposed to put out the fires raging in Europe, including shoring up a plan to eventually wean Greece off rescue loans and ensure that Italy and other larger economies don’t get dragged into the same debt hole. Instead, the meeting was hijacked by the possibility that Greece’s government would fall and abandon the reforms it promised to carry out in exchange for loans.

‘‘The G-20 Summit proved inconclusive and yet again demonstrated that policymakers are allowing themselves to fall behind quickly moving political and economic events,” said Neil MacKinnon, an analyst with VTB Capital. “Whatever the difficulties might be with regard to the Greek situation, Italy is now in the spotlight.”

This weekend, leaders pressured Italy to get serious about sticking to an austerity plan lest it needs a bailout itself. Prime Minister Silvio Berlusconi finally seems ready to toe the line, but it’s now unclear whether he has sufficient support in Parliament to do so.

Italy’s borrowing costs have skyrocketed since the summer, and that only makes it more expensive for the country to pay down its debt. They’re up again Monday despite speculation that the European Central Bank is buying Italian bonds in the markets in an attempt to keep a lid on their borrowing costs — the yield on Italy’s ten-year bonds is up another 0.31 percentage point at 6.56 percent, having earlier risen to 6.66 percent.

The growing worry is that, at some point, it will cost too much for Rome to borrow money from markets — as it did for Greece, Portugal and Ireland before. Only this time, Europe won’t be able to come to the rescue because Italy’s economy is generally considered too big to bail out.

While central bank chief Ignazio Visco insists Italy can survive even if it has to borrow money at 8 percent — it’s now paying around 6.6 percent — the extra cost could put the country on the kind of downward spiral that decimated Greece’s balance sheet.

Greece has stepped back from the brink, promising to cobble together a unity government that looks like it will continue with reforms, but Berlusconi faces a confidence vote this week.

The finance ministers of the 17 countries that use the euro are meeting again later Monday, but it’s not clear they’ll have any more success than the G-20 did in Cannes, France.

The uncertainty was too much for the markets, and shares plummeted around the globe.

In France, the CAC-40 fell 2 percent to 3,059, while Germany’s DAX was down the same amount to 5,848. The FTSE index of leading British shares dropped 1.1 percent to 5,468.

Wall Street was also set to open lower. Dow futures slid 1.3 percent to 11,808, while the broader S&P futures were down 1.1 percent to 1,234.

The worsening of the European crisis is bad news for economies worldwide that are struggling to restart growth. Since slowing economies demand less oil, energy prices slid. The euro also tumbled 0.6 percent to $1.3700 as its future remained unclear.

The euro was also sold off heavily as investors continued to fret over Europe’s debt crisis. It was down 0.3 percent at $1.3758. Earlier it fell below $1.37 after a 0.7 percent decline in retail sales in September in the 17 countries that use the euro added to fears that the eurozone is heading back into recession.

Oil prices tracked equities higher, with benchmark crude for December delivery down 53 cents to $93.73 a barrel in electronic trading on the New York Mercantile Exchange.

Earlier, Asian shares fell. Japan’s Nikkei 225 index dropped 0.4 percent to close at 8,767.09. South Korea’s Kospi lost 0.5 percent to 1,919.10 and Australia’s S&P/ASX 200 was down 0.2 percent at 4,273.40.

Hong Kong’s Hang Seng sank 0.8 percent to 19,677.89. Mainland China’s benchmark Shanghai Composite Index lost 0.7 percent to 2,509.80 and the Shenzhen Composite Index lost 0.6 percent to 1,065.31.