Markets and euro suffer as investors lose patience with Europe's leaders

The euro plunged through the psychologically-important $1.30 level for the first time in almost a year, raising fears of another crisis less than a week after the last "make-or-break" European Union leaders' summit.

Equity, bond and commodity markets were rattled while the tensions were reflected at an Italian bond auction. Rome, where Mario Monti has already been forced to water down his "Save Italy" measures, had to offer 6.47pc yield to raise €3bn (£2.5bn) of five-year bonds - much higher than 6.29pc it paid two weeks ago.

Angus Campbell, head of sales at Capital Spreads, said: "Political leaders and central bankers seem to have got stuck in a quagmire of indecision so as a result financial markets gave up on their lack of resolve today...the prospect of a full-scale European sovereign debt melt down in the near future became more of a reality."

The Stoxx Europe 600 index fell 2.1pc, the French CAC slumped 3.3pc and the German DAX was off 1.7pc. In London the FTSE 100 fell 2.3pc. Gold plunged below €1,600 to its lowest level since July. Sterling hit a nine-month high against the euro.

Strong demand for safe havens saw banks' dollar borrowing triple at the European Central Bank's (ECB) weekly loan offering. A total of 12 banks used the ECB's seven-day dollar swap line, borrowing $5.1bn - three times the $1.6bn level last week.

But in Berlin there were no signs of the paymaster relenting under pressure. Angela Merkel insisted that Europe could overcome the crisis with "patience" and the Brussels plans for fiscal union.

Jens Weidmann, head of the Bundesbank and member of the ECB, quashed residual hopes for ECB intervention. He said it was "astonishing" people think market confidence will be won by "breaking the rules".

Jean-Claude Juncker, president of the Euro Group warned: "If the euro falls – and it won't – then the entire European unification project is at risk."

But fresh data showed that Japan bought 13pc of €300m of European Financial Stability Fund (EFSF) bonds at a recent auction raising hopes for help from Asia.

David Cameron also ruled out the UK making an extra €30bn contribution to the International Monetary Fund to bail-out countries hurt by the financial crisis, including the eurozone.

The Prime Minister's office said it did not expect Britain to contribute more than an extra £10bn and said money from the international community should not be an alternative to the euro area tackling its own problems.

The suggestion that Britain could be on the hook for a greater contribution arose after last week's EU summit, when leaders said they would contribute an extra €200bn to the IMF to be used for eurozone bail-outs, with €150bn coming from the eur nations and the remainder coming from the remaining 10 EU countries.

The Telegraph