PRESS ASSOCIATION -- European markets have slumped deep into the red after renewed fears over the continent's debt crisis rocked banks across the continent.
In London, the FTSE 100 Index plunged 3.6% to 5102.6, knocking £49 billion off the value of UK blue chips and wiping out last week's gains
Markets elsewhere in Europe were hit even harder with the Cac-40 in Paris 4.7% lower and the Dax in Frankfurt down by 5.3%, with the uncertainty increased by US markets being shut for a public holiday.
Bank shares dragged the indices down on fears over the health of balance sheets in the sector after Deutsche Bank's outgoing chief executive Josef Ackermann said some would not survive if they had to recognise losses on government debts at current levels.
Economic data for the services sector in the eurozone also showed it was still growing, but only just.
David Jones, market strategist at IG Index, said: "The all too familiar worry about European sovereign debt has raised its head again. With no chance of a boost from US markets, European investors stayed firm sellers," he added.
The euro fell by almost 1% against the dollar at one point, while investors seeking safe havens rushed into German bonds sending yields on benchmark German debt to an all-time low.
In the UK, taxpayer-backed Royal Bank of Scotland fell more than 12% after it was singled out by a broker as the most vulnerable British target of claims made by the US Federal Housing Finance Agency (FHFA) over the subprime mortgage scandal.
Barclays and HSBC, who joined RBS on the list of 17 banks, fell 7% and 4% respectively, while Lloyds Banking Group, damaged by weakened sentiment, fell 7%.
There was more gloom for the banking sector in a report by forecasters at the Ernst & Young ITEM Club which warned the financial services sector in the UK faces sluggish growth, threatening the recovery prospects of the wider economy.