At the same time, the governments of Germany and Belgium made last-ditch efforts to bail out ailing banks. Germany agreed to a a 50 billion euro ($68 billion) package to bail out Hypo Real Estate, the country's second-biggest commercial property lender, after a rescue plan by private lenders fell apart. In Belgium, the government managed to get French bank BNP Paribas SA to buy a 75 percent stake in troubled lender Fortis NV.

But as the rate of bank rescue deals intensified, Europe showed few signs of being able to work together on a common solution, all of which unnerved markets. An economic summit of European leaders over the weekend failed to produce any concrete plan, and the continent's governments were instead separately taking steps to guarantee the safety of their respective financial systems.

A two-day meeting of finance ministers in Luxembourg started today, but officials in Germany and elsewhere have spoken out against the idea of a U.S.-style bailout fund for all of Europe.

European Central Bank President Jean-Claude Trichet said Monday in Luxembourg he thinks jittery financial markets are overestimating risks. Across Asia, all markets closed in the red. Tokyo's Nikkei 225 index fell to its lowest level in 4 1/2 years, sinking 4.25 percent to 10,473.09.

Hong Kong's Hang Seng index slid 5 percent to 16,803.76. Markets in mainland China, Australia, South Korea, India, Singapore and Thailand also dropped sharply. Indonesia's key index plummeted 10 percent, its biggest one-day drop ever, while the benchmark Shanghai Composite Index sank 3.7 percent to 2,293.78.

Banks and other financial shares saw heavy declines. Shares of Ping An Insurance Co. rose even after it said Monday it will record a $2.3 billion loss on its stake in European bank Fortis in the biggest blow yet to a Chinese institution from the global credit crisis. Ping An's shares rose 0.4 percent.

"This credit crunch looks like it's not going away any time soon," said Alex Tang, head of research at brokerage Core Pacific-Yamaichi in Hong Kong. "Apart from a credit crunch in Europe, investors are quite concerned about the worsening outlook on the U.S. economy."

Figures released Friday showed that 159,000 jobs in the U.S. were lost last month, the fastest pace in more than five years.

Such concerns overshadowed any investor optimism over the U.S. House of Representatives' approval Friday of a massive bailout plan that will allow the U.S. government to buy distressed mortgages and securities backed by mortgages from banks and other financial institutions.

Investors questioned how long it would take for the package to unfreeze credit markets, restore bank lending and generally shore up the U.S. economy.