Meltdown: £100 billion wiped off shares

The FTSE-100 had collapsed 430.59 to 4549.66 by mid-afternoon. Any hopes that Friday's US bank bail-out would calm the markets were swept aside in frantic trading that saw eight per cent wiped off the index of leading companies.

Major European-markets were also sharply down and on Wall Street the Dow opened 515.32 lower at 9810.06, the first time it has been below 10,000 for four years.

Trading on exchanges in Iceland and Russia had to be suspended. Once again bank shares saw the biggest plunges with HBOS falling 16 per cent, RBS down 21 and Barclays 16 per cent.

The headlong rush out of shares pushed the price of "safe haven" gold up more than four per cent to $870.02 an ounce.

Chancellor Alistair Darling told the Commons "all practical options must remain open".

Mr Darling also rapped German Chancellor Angela Merkel for sparking a chaotic rush across Europe to protect bank savings.

In thinly veiled criticism, the Chancellor demanded that European Union nations "work far more closely together" to deal with the economic crisis.

Ms Merkel promised at the weekend that the deposits of german savers were safe - heaping pressure on the British government to fully guarantee savings here.

Today she insisted that this was a political statement rather than a move to a new, legally binding guarantee. But Spain, Denmark, Sweden and Austria reacted to her comments by boosting protection measures for their savers.

Seeking to restore a sense of unity in Europe, EU leaders this afternoon thrashed out a joint statement on tackling the financial turmoil.

It said: "All the leaders of the European Union make clear that each of them will take whatever measures are necessary to maintain the stability of the financial system - whether through liquidity support through central banks, action to deal with individual banks or enhanced depositor protection schemes.

"While no depositors in our countries' banks have lost any money, we will continue to take the necessary measures to protect both the system and individual depositors. In taking these measures, European leaders acknowledge the need for close coordination and cooperation."

In the Commons, Mr Darling also fired a warning shot at shadow chancellor George Osborne, accusing him of being irresponsible and threatening to undermine shares in British banks.

The Chancellor is angry that Mr Osborne has talked up a proposed recapitalisation plan for banks after a recent meeting with Bank of England governor Mervyn King and himself.

Stressing that all options were being examined, Mr Darling told MPs: "But it would be irresponsible to speculate on the specifics of future responses.

"Indeed providing a running commentary could add to uncertainty in already febrile market conditions."

Following the confusion sparked by Berlin, the Chancellor stressed: "In light of what has happened over the weekend, it's especially important that EU member states work far more closely together."

Mr Darling also said that the new protection for savings of up to £50,000 would mean that people with a joint account would have £100,000 safeguarded.

The Chancellor is to travel to Luxembourg tomorrow for talks with other EU finance ministers. Gordon Brown was this afternoon phoning Ms Merkel seeking clarification over the details of her pledge to protect savers' money.

Former Tory chancellor Ken Clarke warned of a "panic" flight of funds from London if other EU countries offered full guarantees to savers and Britain did not follow suit.

"I think it's a thoroughly bad idea to give sweeping guarantees to all deposits," he said. "But if everybody else does it, one by one you are going to have to avoid the risk of a lot of money going out of London in a panic."

Mr Brown today chaired the new national economic council and has spoken to French president Nicolas Sarkozy, whose country holds the EU presidency, to discuss the latest financial developments.

A banking Bill will be published tomorrow to make it easier for the government to intervene to deal with failing banks.

Mr Darling will travel to Washington on Thursday, on the same day that the Bank of England's Monetary Policy Committee is expected to cut interest rates, possibly by 0.5 per cent.

The Bank's governor Mervyn King will also go to the US on Friday where finance ministers and central bankers from the G7 group will meet amid expectations of a global rescue plan.