World stock markets have fallen after measures announced by the European Central Bank failed to calm fears about the eurozone debt crisis and more weak economic figures from the US fuelled fears of a sharp slowdown.
Stock markets in London, Frankfurt, Milan and Paris closed around 3% lower.
In the US, the Dow was down 511.93 points to 11,384.51 in closing trade, while the S&P 500 lost 4.8% to 1,200.18, while the Nasdaq Composite plunged 5.1% to 2,556.39.
Earlier, borrowing costs for Italy and Spain rose again to more than 6%.
The ECB left its main interest rate unchanged at 1.5% and it bought eurozone government bonds.
President of the ECB Jean Claude Trichet said it will also allow banks access to as much liquidity as they need until at least the end of the year.
European Commission President José Manuel Barroso urged European Union leaders to reinforce their financial defences.
Mr Barroso made his comments in a letter to EU leaders as the debt crisis threatens to engulf Spain and Italy.
He warned that 'it is clear that we are no longer managing a crisis just in the euro-area periphery'.
The European Commission has called for a re-assessment of all elements of the eurozone's current and future bailout funds, including their size, to convince markets the eurozone can respond to the debt crisis.
Mr Barroso urged a 'rapid reassessment' of the European Financial Stability Facility and the European Stability Mechanism, which is due to come into effect in 2013.
He called on leaders to make sure the EFSF and ESM were 'equipped with the means for dealing with contagious risk'.
A Commission spokeswoman clarified that the call for re-assessment included the size of the funds.
Some analysts say the current €440bn available to the EFSF may not be enough to cope with a bailout for a bigger eurozone country, such as Spain or Italy.
Mr Barroso said the 21 July agreements reached by EU leaders, which give the EFSF more flexibility, were not having their intended effects on the markets.
He attributed market pressure on euro states to slow global growth and US debt problems as well as to 'first and foremost, the undisciplined communication and the complexity and incompleteness of the July 21 package'.
Spain raises €3.3bn in bond auction
Spain had to pay higher a higher rate of interest at a bond auction earlier today, underscoring the general recent rise in borrowing costs.
It managed to raise €3.3bn but the yield was 4.8%.
At a parliamentary debate in Rome last night, Italian Prime Minister Silvio Berlusconi insisted that his country would not be drawn into the debt crisis.
In a speech aimed at soothing concerns over a possible debt crisis, Mr Berlusconi said Italian banks had liquidity and were solvent.
'Our country has a solid political system.'
European stock markets rebounded slightly this morning after days of sustained losses as investor concerns mounted over the eurozone debt crisis.
