Europe governments go their own way on crisis

Meanwhile, the euro slid around 2 percent against the US dollar and was trading just above the $1.35 mark, its lowest level for over a year.

Faltering confidence in the financial system following a series of bank bailouts forced governments to offer deposit guarantees, analysts said, since failure to match those offered by Ireland, France, Greece and Sweden could risk a massive funds outflow.

Yet the guarantees themselves raised questions about their potential impact on government finances and showed that European governments were still unable to find a unified approach despite a weekend summit where they agreed to do just that.

"Even if bank guarantees are not made explicit, it seems very unlikely that any European government would stand by and allow private depositors to lose their savings," said Jennifer McKeown, an economist at Capital Economics.

"Whether they bail out banks as and when they fail or act pre-emptively to boost bank capital, as has been suggested in Britain, the pressure on government finances will be severe," she added.

The crisis engulfing Europe and its markets has fueled talk of coordinated interest-rate cuts from 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 Sept. 11, 2001, terrorist attacks on the U.S.

"I think at this point (a coordinated cut is) quite likely with the current spread of problems at full strength on the European financial system," said Luca Cazzulani, a strategist with UniCredit in Milan.

So far, the banks have continued to flood the money markets with additional liquidity. On Monday, the ECB injected another $50 billion into money markets while the BoE added another $10 billion.

Additionally, the Fed said that 28-day and 84-day cash loans being made available to banks will be boosted to $150 billion each, effective Monday. Those increases will eventually bring the amounts outstanding under the program to $600 billion.