European stocks sank early on Tuesday after Greek prime minister called a referendum on the latest bailout deal, risking a new euro zone crisis, while data showed China's factory activity slowed to a near three-year low.

At 8:05 a.m., the FTSEurofirst 300 <.FTEU3> index of top European shares was down 2.2 percent at 973.85 points, after tumbling 2.2 percent in the previous session.

Euro zone banks were hammered, with UniCredit down 4.8 percent and Credit Agricole down 8 percent.

The risk is that a 'no' from the Greeks will competely derail the rescue efforts. With the vote due in January, we can kiss the year-end rally goodbye, a Paris-based trader said.

Miners also took a beating, with Xstrata down 4.7 percent and BHP Billiton down 3.1 percent.

(Reporting by Blaise Robinson)