Markets plunge on fears over eurozone economies

Stock markets tumbled across the world this evening amid renewed fears the debt crisis in Europe will limit growth and lead to a breakup of the single currency.

The FTSE-100 tumbled 138.86 points to 5294.87 shortly before closing this evening, with many traders predicting it would close even lower. The selling gathered pace as Wall Street opened with sharp falls, losing 136.72 at 10,646.23 in early trade.

Banks were the biggest fallers across all countries, with HSBC down 3% and Barclays tumbling 19p to 310.4p — a near-6% slide. Santander, BNP Paribas and other Continental banks also suffered big declines.

While the FTSE-100 was 3% down and the Dow was off more than 1%, European exchanges such as those in Spain, Portugal and Italy were all down about 5%.

Initial optimism about the Greek aid package earlier this week has rapidly deteriorated because of concerns that even the $1 trillion (£686 billion) on offer was not enough.

Veteran former US Federal Reserve chairman Paul Volcker last night said he was concerned the euro area may break up altogether.

He told students at the London School of Economics: "You have the great problem of a potential disintegration of the euro."

The euro fell sharply against the dollar as some commentators said the single currency might not survive the crisis hitting Greece, Spain and Portugal. It fell to $1.2458, and earlier in the day dropped to an 18-month low of $1.2433. The pound also slipped, sitting at $1.4623 compared with $1.4655 at yesterday's close.

Deutsche Bank chief executive Josef Ackermann today sparked part of the new panic as he said he believed Greece may not be able to repay its debt.