By Hugo Duncan

Last updated at 10:22 PM on 18th July 2011


Fears about debt in Europe and the United States tore through financial markets yesterday as shares around the world tumbled.

The FTSE 100 index dived more than 90 points to 5,752 – reducing the value of Britain's biggest companies by almost 24billion – with  taxpayer-supported banks leading the sell-off.

Shares in Europe and the  U.S. were also on the slide amid growing concern that the  euro-zone debt crisis will spread to Italy and Spain.

Tumbling: FTSE 100 shares in the City of London fell by more than 90 points over debt fears in the eurozone and U.S.

Tumbling: FTSE 100 shares in the City of London fell by more than 90 points over debt fears in the eurozone and U.S.

The failure of politicians in Washington to strike a deal to lift America's debt ceiling also knocked confidence.

The U.S. will run out of money early next month if the borrowing limit is not raised – but Democrats and Republicans are at loggerheads over how to deal with the crisis. A default by the U.S., the first in its  history, could wreak havoc in the financial markets and the global banking system.

David Jones, chief market strategist at financial spread-betting firm IG Index, said: 'The market remains wary of European sovereign debt, and the disturbing lack of progress on agreeing terms to raise the U.S. debt ceiling is also raising the tension.'

Investors also poured scorn on the results of 'stress tests' on 90 European banks after  regulators failed to take into account the possibility of a country defaulting on its debts.

All four UK banks tested – HSBC, Barclays, Lloyds Banking Group and Royal Bank of Scotland – passed with flying colours despite having more than 200billion tied up in Europe's weakest economies.

Bank shares fell sharply when the stock market reopened yesterday, with Lloyds and Barclays down more than 7 per cent and RBS 6 per cent.

Concern about the health of the banking system added to fears about sovereign debt in Europe and the U.S.

Flying colours: HSBC, Barclays, Lloyds Banking Group and Royal Bank of Scotland all passed the health check by the European Banking Authority on Friday night

Flying colours: HSBC, Barclays, Lloyds Banking Group and Royal Bank of Scotland all passed the health check by the European Banking Authority on Friday night

Greece, Ireland and Portugal have been handed 240billion of emergency funds by the European Union and the International Monetary Fund – including 12.5billion from Britain.

Athens now needs a second bailout and the crisis is threatening to spread to Italy and Spain – two of the biggest economies in the single- currency bloc.

The euro fell again yesterday and borrowing costs in Italy and Spain soared on worries about towering levels of debt in both countries.

America yesterday urged Europe to get to grips with the crisis. Treasury secretary Tim Geithner said: 'What Europe obviously needs to do is to act more forcefully to contain the risk of an escalating crisis in Europe. They have the capacity to manage this in a way that does not add to the broader burdens of the global economy.'

And the head of the European Central Bank blasted leaders in the eurozone for failing to deal with the sovereign debt crisis.

'There is an absolute need to improve verbal discipline,' said Jean-Claude Trichet.

'The governments need to speak with one voice on such complex and sensitive issues as the crisis.'

Choppy: The FTSE 100 has risen and fallen considerably in the past three months

Choppy: The FTSE 100 has risen and fallen considerably in the past three months

But he said Europe could prevent the crisis from destroying the euro and insisted the single currency remained 'a highly credible currency'.

European leaders will hold talks in Brussels on Thursday to thrash out a deal to bail out Greece and protect Italy and Spain from contagion.

Roger Bootle, managing director of Capital Economics, said: 'The euro-zone authorities are much less in control of the euro's destiny than either they or the markets believe.

'In the end, it could be market pressure, exerted through the banking system, which forces a break-up of the euro.'

At the first EU talks on the budget since the European Commission unveiled an inflation-busting seven-year spending plan, Europe Minister David Lidington said yesterday: 'I made clear the seriousness with which Britain approaches the budget negotiations, and our view that the Commission's initial proposal is unrealistic.

'I repeated our opposition to any new taxes.'

Places:
Athens,
Brussels,
Washington,
Portugal,
Greece,
Italy,
Ireland,
Spain,
United Kingdom,
America,
Europe
Organisations:
International Monetary Fund,
European Central Bank

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UKIP have been saying to anyone that will listen, that we need to get out of the EU. Unfortunately not enough of us were listening.

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For decades the greed and sleaze of those at the top, in politics, business, industry and commerce, the media and allegedly some in blue, has known no bounds. They have sucked and sucked the life-blood out of nations in their desire for greater wealth, shifting jobs overseas to boost the bottom line but making millions in western nations unemployed in the process; and, whilst they have played on their yachts in the sunshine in the Med, the Caribbean and other hot-spots nations have been slowly slipping down the pan because of incompetence by politicians, by bankers and by those who own and control companies. It looks like we are now in for years of austerity courtesy of those who enjoy the limelight and the trappings of success but have proven to be nothing more than snake-oil salesmen.

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A default by the U.S., the first in its history, could wreak havoc in the financial markets and the global banking system. They wreaked havoc in 2007 and not a single criminal prosecution. All of the perpetrators of that meltdown have cushy government jobs now. By appointment. What makes you think they care. They get theirs.

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Look as if austerity and cuts does not work very well. Never mind, just because it does not work everywhere else is no reason to stop.

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the day is nearing when even the most stupid people in our society will realise that we are governed by a bunch of fiscally incompetent self-serving hypocrites. would you give gordon brown a job anywhere near your money ? he had the audacity to put his name forward for head of the international monetary fund ! i would love to have seen his resume. previous employment - chancellor of the exchequer of great britain " where i achieved bankruptcy in 10 years ". wise up england. a child knows if you have five pounds you can spend five pounds. that means that a child has more fiscal intelligence than any politician !

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the day is nearing when even the most stupid people in our society will realise that we are governed by a bunch of fiscally incompetent self-serving hypocrites. would you give gordon brown a job anywhere near your money ? he had the audacity to put his name forward for head of the international monetary fund ! i would love to have seen his resume. previous employment - chancellor of the exchequer of great britain " where i achieved bankruptcy in 10 years ". wise up england. a child knows if you have five pounds you can spend five pounds. that means that a child has more fiscal intelligence than any politician !

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