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Debt fears send markets into freefall

IRISH shares plummeted yesterday as a wave of selling engulfed Europe on fears that the debt crisis was ramping up once again.

By the close of trading, the ISEQ Overall Index was down 3.46pc, or 87.21 points, to close at 2,434.08, hot on the heels of a loss on Friday.

The index slipped back from the opening and kept heading south after German Chancellor Angela Merkel's party lost its fifth election this year over the weekend. Ms Merkel failed to sway voters in her home state with a campaign based on her handling of the euro area's debt crisis.

The vast majority of shares fell on the index, with CRH one of the big flops on the day. The construction group dropped 5.52pc to €11.12 to slip to the lowest level since the height of the market turmoil a fortnight ago.

US President Barack Obama will address Congress on Thursday to announce a new jobs programme, but it is not expected to include a range of "shovel ready" construction projects as was previously hoped.

Packaging company Smurfit Kappa Group fell 6.47pc to €4.96 following the news that Venezuelan President Hugo Chavez planned to seize lands owned by the Irish company.

The banks slid on the renewed crisis and speculation that Government plans for debt forgiveness may not be as wide ranging as previously expected. Bank of Ireland fell 11.38pc and AIB dropped 8.67pc.

Few stocks gained on the day, but fruit company Fyffes added 6.58pc to 39c after the company posted strong half-year results and retained guidance for the rest of the year.

Elsewhere, European stocks tumbled, with the Stoxx Europe 600 Index posting its biggest two-day drop since March 2009, as investors speculated that support for bailing out Europe's indebted nations may fade.

National benchmark indices dropped in all 18 western European markets. Germany's DAX Index tumbled 5.3pc, sending the gauge's companies to their cheapest-ever valuation as a multiple of estimated earnings.

The UK's FTSE 100 dropped 3.6pc and France's CAC 40 lost 4.7pc, while the Stoxx Europe 600 Index lost 4.1pc.

"Europe is being hammered on the debt crisis," said Henrik Drusebjerg, senior strategist at Nordea Bank in Copenhagen. "It's Merkel getting slapped at the regional election yesterday and it's the Finns demanding collateral for the money they're wiring to Greece."

Deutsche Bank tumbled 8.9pc, Credit Suisse plunged 8.1pc and Royal Bank of Scotland declined 12pc after the lenders were among 17 to be sued by the US to recoup money spent on mortgage-backed securities bought by Fannie Mae and Freddie Mac.

HSBC slid 3.8pc, Barclays lost 6.7pc and Societe Generale sank 8.6pc.

Irish Independent