Stocks in Europe follow Asian plunge; U.S. futures are lower

LONDON -- Markets plunged across Europe early Monday, following a sharp drop in Asia, despite the USA's $700 billion rescue package and a rush by European governments to assure savers their deposits are safe.

The drop — between 5% and 6% on the leading indexes in London, Paris and Frankfurt at mid-day —. In Asia, the Indonesian stock market closed 10% lower, its biggest single-day decline.

And trading on Russia's leading stock exchange, the MICEX, was suspended for an hour after shares plunged more than 15%.

European investors don't believe U.S. rescue efforts to clear bank books of devalued securities will solve credit problems here, analysts say. Investors also aren't impressed by European government efforts to boost guarantees on personal saving accounts and prevent runs on banks.

"It's not enough," markets analyst Clem Chambers said of the U.S. plan signed Friday by President Bush. "Half of the EU (European Union) is running around like headless chickens."

Austria, Denmark and Sweden announced they are providing 100% guarantees or upping insurance on personal savings accounts.

The actions came after German Chancellor Angela Merkel on Sunday offered blanket guarantees to savers there. However, no new legislation was offered Monday to provide 100% government insurance on deposits. At present, up to about $40,000 of personal accounts are guaranteed in Germany.

Germany's assurances stunned much of Europe and started a stampede. A day earlier, Germany had shunned a proposal by French President Nicolas Sarkozy at a meeting in Paris to provide a European-wide bailout and stabilization plan similar to the U.S plan.

"Merkel's complete 180 — that's the sort of incompetence that will scare everyone (in the markets) to death," said Chambers, CEO of ADVFN, Europe's leading shares and stocks website.

The growing number of government guarantees on deposits came after Ireland last week pledged to back personal savings accounts 100% — action that drew heavy criticism from much of Europe, which complained that gave Irish banks an unfair edge in luring savers' money. Greece followed, and Britain raised insurance on personal accounts from 35,000 pounds to 50,000 pounds, or about $88,000.