The FTSE is on track to hit its lowest closing level in almost a year amid fresh warnings the eurozone crisis will engulf Italy and Spain.
London's leading index was trading more than 106 points, or 1.9%, lower at 5,477 shortly before 3pm GMT.
The FTSE is on track for its lowest close since September and has also hit an intra-day low for the year.
The heaviest sell-off came after European Commission president José Manuel Barroso called for the eurozone rescue fund to be significantly enlarged.
Barroso warned the crisis was spreading and that Europe risked losing the faith of the financial markets.
He said markets "remain to be convinced that we are taking the appropriate steps to resolve the crisis".
Satlellite operator Inmarsat, which provides communications for the military, lost up to a quarter of its value due to the scaled-back operations in Afghanistan and elsewhere. Lloyds was 8% lower at 35p.
The Dow Jones also opened sharply lower on Thursday, losing more than 180 points to 11,713.
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