The FTSE 100 has fallen a further 2.7% in early trading after the S&P 500 closed under 1,100 for the first time since September 2010.
The FTSE was down 2.7% at 4,939 shortly before 9am BST, with the German Dax sliding 2.6% to 5,238 and France's Cac 40 falling 2.5% to 2,852, with pressure on financials reflecting concerns over Belgium's Dexia and delays to the next part of Greece's bailout package.
Ministers have not yet approved the release of next tranche of bailout cash, totalling €8bn and scheduled for release in mid-October, over concerns Greece has not acted sufficiently to balance its books.
A final meeting will take place on 13 October in which leaders will attempt to thrash out a deal.
The indecision resulted in investors offloading banks, as fears intensify of a lender failing as Greece's financial crisis deepens.
The S&P 500 declined 2.9% or 32 points to 1,099, while the Dow Jones fared no better, down 2.36% or 258 points to 10,655.
US financial stocks fell 4.5% yesterday, taking total losses so far this year to 29%.
However, the US dollar continued to strengthen as investors become increasing less risk averse, up 0.19% against the pound to $1.55.
Meanwhile, in Asia the Nikkei slipped 1.05% to 8,456.
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