A fresh slump for the FTSE 100 Index saw another £15 billion wiped off the value of London shares today amid continuing fears over Greek debts.
The top-flight joined indices around the world in the sell-off after Standard & Poor's (S&P) slashed Greece's sovereign debt to junk status and downgraded Portugal - fuelling worries that the crisis could spread to other EU countries.
The Footsie, which lost 2.6% yesterday in its biggest one-day fall since last November, dropped around 1% today, taking it well below the 5600 mark.
Analysts said the fall would have been greater if heavyweight stocks Royal Dutch Shell and BP were not higher today after positive trading reports.
Indices in Asia were down heavily overnight led by a 2.6% fall on Japan's Nikkei. In Europe both France's Cac 40 and Germany's Dax were down around 2%, while the Lisbon stock market fell 6% after dropping more than 5% yesterday.
The euro is also under pressure amid concerns over contagion after the S&P downgrade of Portugal, which the agency said was due to the "amplified risk" faced by its economy.
Other countries with high levels of debt, including Italy, Spain and even the UK, have come under scrutiny in the wake of the Greek crisis.
The fears have made it harder for Greece and Portugal to pay down debt and borrow - fuelling concerns that European governments could struggle to raise funds at a time when they are spending furiously to heal their recession-hit economies.
Lorraine Tan, director of equities research at S&P in Singapore, said: "The fear is that Greece and Portugal are just the appetisers."
Keith Bowman, equity analyst at Hargreaves Lansdown, said: "There is still a degree of uncertainty surrounding the UK, given our debt levels and what might be the case after the general election."
Athens has called for aid from a 45 billion euro (£39 billion) rescue package from fellow eurozone members and the International Monetary Fund (IMF).
But market turbulence has been intensified in recent days by concerns that the country may default on its loans as it hurtles towards a debt payment in mid-May.
Uncertainty over the timing of the bail-out package has been fuelled by Germany, which is demanding strict conditions before it will shoulder the lion's share of it.
Markets are hoping a meeting between the International Monetary Fund, European Central Bank and German chancellor Angela Merkel today will provide some good news on the crisis.
Financial stocks took a hammering in the wake of the economic nerves.
Royal Bank of Scotland and fellow part-nationalised lender Lloyds Banking Group both lost around 5%.
But the Footsie was saved from greater falls by 1%-plus rises from BP and Shell, which together account for a large chunk of the market.Reuse content