Oct. 6--European governments struggled to find a coordinated response to the crisis sweeping financial markets Monday, as countries one after the other announced sweeping deposit guarantees on their own to try and shore up their banks. Stock markets plunged.

Iceland and Denmark became the latest countries to declare a deposit guarantee Monday after a startling announcement by German Chancellor Angela Merkel on Sunday that her government would guarantee all private bank savings and CDs held in the euro zone's largest economy. "We want to tell people that their savings are safe," she said.

Faltering confidence in the financial system, undermined by a series of bank bailouts, was precipitating the measures, analysts said, since a failure to match guarantees by Ireland, France, Greece and Sweden could risk a massive fund outflow. Yet the guarantees themselves raised questions about their potential impact on government finances, and showed European governments were unable to find a unified approach despite a weekend summit where they agreed to do just that.

"Governments have no choice but to give the guarantees on deposits, otherwise we will see runs on banks and a complete loss of business and consumer confidence," said Neil Mackinnon, chief economist at ECU Group.

"The stakes have never been higher," he added.

Markets responded to the disarray by sinking rapidly, following selloffs in Asia. Russia shut down both its stock markets after they fell more than 15 percent. Germany's DAX was down 428.04, or 7.4 percent, at 5,368.99, while France's CAC-40 was 350.74 points, or 8.9 percent, lower at 3,730.01. The CAC's fall in afternoon trading exceeded the record one-day decline of 7.39 percent from Sept. 11, 2001.

The FTSE 100 index of leading British shares was down 269.30 points, or 5.5 percent, at 4,601.04.

Wall Street took its cue from Europe, with the Dow Jones industrials down 430.81 points, or 4.2 percent at 9,907.55 amid growing fears that the credit crisis is spreading around the world.

Meanwhile, the euro slid below the $1.36 mark for the first time in over a year.

The crisis engulfing Europe and its markets has fueled talk of coordinated interest-rate cuts by the world's leading central banks, possibly as early as Monday.

Analysts said they wouldn't be surprised if the U.S. Federal Reserve, the European Central Bank and the Bank of England instigate the first joint action on interest rates since the September 2001 terrorist attacks on the U.S.

"I think we will see interest-rate cuts this week," said ECU Group's Mackinnon.

So far, the banks have continued to flood the money markets with additional liquidity.