European shares fell to a two-month low, posted the biggest one-day drop in a month and braced for further volatility on Wednesday after a disappointing auction of Spanish debt reignited concerns about the euro zone's debt crisis.

Euro zone banks, which own the bulk of the region's debt, fell 3.1 percent after Spain sold less debt than it had hoped for.

The pan-European FTSEurofirst 300 index provisionally closed 2.1 percent lower at 1,049.97, while the euro zone's Euro Stoxx 50 fell 2.5 percent to 2,396, breaching the 50 percent retracement of its December-March move.

The euro crisis always comes in waves and this one is clearly a new wave, Holger Schmieding, chief economist at Berenberg Bank said. There is a lot of volatility and today it doesn't feel like it is the bottom already.