In London, the FTSE 100 was down 1.5 per cent, the DAX in Frankfurt dropped 0.84 per cent while the CAC-40 in Paris dropped 2.2 per cent.
Nick Spicer, Al Jazeera's correspondent in Washington, said "it felt like a panic attack on the US markets".
"The value of publicly trading companies in the United States dropped by nine per cent in a matter of seconds. Authorities at Nasdaq are looking into a possible technical glitch," Spicer said.
"But what I think this underlines is that the markets are really ready for a snowball effect of panic when they are watching the demonstrators in Athens protesting against the government pushing through this austerity package."
On Thursday, Greek MPs approved a crucial austerity bill needed to tap into a $146 billion aid packagefrom the 15 other eurozone countries and the International Monetary Fund.
The Greek government needs $11.6 billion by May 19 to cover debt payments.
Greece's debt crisis has threatened to polarise Greek society at a time when millions are already reeling over the effects of the financial crisis. During protests on Wednesday, police clashed with protesters, killing three workers.
Earlier on Thursday, investors listened to hear if the European Central Bank (ECB)would announce measures that would calm the markets.
Jean-Claude Trichet, the central bank president, said that Greece was not in danger of defaulting.
"Right now you just have a panic sell ... It's very likely we've seen the highs for this cycle"
president of CFAS
Investors were disappointed the ECB did not take fresh measures to help stem the Greek debt crisis.
The ECB left interest rates at a record low.
"Right now you just have a panic sell. It could be a longterm negative for stock market because it could mean the longterm high is in place. It's very likely we've seen the highs for this cycle,'' Keith Springer, president of Capital Financial Advisory Services in Sacramento, California, told the Reuters new agency.
The White House said on Thursday that reforms in Greece were "important" but would take time and that the US Treasury was monitoring the situation.
"The president has heard regularly from his economic team," Robert Gibbs, the White House spokesman said, adding that Obama's aides had been in frequent contact with their European counterparts.