By Atul Prakash and Alistair Smout
LONDON (Reuters) - Britain's top share index fell sharply on Monday, with investor sentiment punctured by Greece's deepening debt crisis following the breakdown of talks with creditors and Athens' imposition of capital controls.
Travel and leisure stocks were hit hard by events in Greece, a popular holiday destination for Europeans, and news that tour companies were evacuating thousands of holidaymakers from Tunisia after a gunman killed dozens of people at a beach hotel on Friday.
The blue-chip FTSE 100 index was down 133.22 points, or 2 percent at 6,620.48 points at the close.
It was pressured by a 2.2 percent drop in UK banking index after Greece closed its banks to check the growing strains on its crippled financial system.
Greek Prime Minister Alexis Tsipras announced a referendum for July 5 to decide whether the country should accept or reject the bailout agreement offered by creditors.
"Tsipras devolving the decision to the electorate is a populist move that reduces the likelihood of a deal with Greece's creditors and which causes the kind of uncertainty markets hate," Lorne Baring, managing director of B Capital Wealth Management, said.
"We expect downward pressure to resume with this new twist in the Greek saga but it may be short-lived as the political pressure to resolve the situation mounts."
Among companies evacuating tourists from Tunisia following Friday's attack, TUI Travel shed 7.1 percent, making it the biggest FTSE 100 faller.
The firm's Thomson and First Choice businesses said they had around 6,400 customers across the country.
International Consolidated Airlines Group (LONDON:ICAG) and budget airline easyJet (LONDON:EZJ) fell 4.1 percent and 2.1 percent respectively.
"The whole situation is pretty awful, and the travel industry is going to be hit the most. People are being repatriated from Tunisia, there are cancellations, it all has a bad effect on travel companies," Mark Priest, sales trader at ETX Capital, said.
"People might also be nervous about booking new holidays, so it could have a longer term impact too."
Basic resources stocks also dropped, with the UK mining index down 0.7 percent.
Although shares in China, the world's top metals consumer, extended a recent decline, precious metal miners Randgold (LONDON:RRS) and Fresnillo (LONDON:FRES) were two of only three stocks in positive territory, as gold was boosted by investors looking for safe-havens.