Stock markets lurched in confusion on Friday, as new credit downgrades in the beleaguered eurozone undermined a pledge by world leaders to shore up the global economy.
European shares rose, fell and edged up in the maelstrom.
With French banks in the eye of a storm of strains in the EU banking system, the French market regulator sounded the alarm, speaking of "a risk of systemic crisis."
Moody's credit agency downgraded top Greek banks, warning that holders of Greek government debt might suffer further losses, implying another blow to bank balance sheets.
The Greek-eurozone debt crisis is aggravating slowdown in the global economy and is spreading dangerous contagion to Italy and to banks, particularly French banks which have big exposure to Greek and Italian debt.
Moody's also downgraded the debt of Slovenia because of economic downturn, political crisis and problems in the banking system while the autonomous Portuguese island of Madeira was also hit by a Moody's debt downgrade.
This week the S&P agency downgraded Italy and top Italian banks.
European stocks were showing slight gains by mid morning, but were unsteady, after sharp falls in Asia and on Wall Street.
The euro rose to $1.3527 after striking an eight-month low point of $1.3385 on Thursday. The euro also gained to 103.23 yen, after hitting a ten-year low of 102.22.
The head of market analysis at Schneider FX, Stephen Gallo, said: "The severity of the deterioration in the financial system really hit home yesterday, with market turbulence in many respects culminating during the day at their worst levels sice the purges of 2008."
Lloyds Banking Group economist Charles Diebl said: "It is arguable that the 'crisis' has somewhat moved on and the scale of the solution has multiplied as a result."
In Asia, the head of research at CitisecOnline.com, April Lee-Tan, said: "Fund managers are liquidating their positions because of global economic concerns ... it's sentiment-driven ... panic-selling."
Overnight in Washington, where the International Monetary Fund is holding its annual meeting, Group of 20 (G20) finance ministers and central bankers promised a powerful response to the growth, debt and banking crises hanging over the world economy.
In a surprise statement they promised joint action, speaking of "a collective and bold action plan, with everyone doing their part", to be prepared for the G20 summit in Cannes, France on November 3-4.
World Bank head Robert Zoellick said separately that Europe, Japan and the United States had to deal with their "big economic problems before they become bigger problems for the rest of the world."
"The world is in a danger zone," he added.
The new head of the IMF, Christine Lagarde, said that debt, and banks with inadequate capital "could actually suffocate the recovery" of the global economy.
They spoke after Britain, Canada, Australia, Indonesia, Mexico and South Korea had issued a dramatic joint appeal for action in a letter to the G20, grouping developed and developing nations, meeting in Washington on Friday.
"Eurozone governments and institutions must act swiftly to resolve the euro crisis and all European economies must confront the debt overhang to prevent contagion to the wider global economy," they declared.
In London, ETX Capital trader Manoj Ladwa warned that any stocks bounce would be "short-lived" and commented: "G20 finance ministers passed up a golden opportunity to soothe the markets as talk of tackling the financial crises fell short of any decisive action."
"Highlighting the obvious fragility of the financial system without clear cut measures to avert a meltdown is unlikely to instill confidence in investors," Ladwa added.
In Paris, the president of the AMF financial market authority, Jean-Pierre Jouyet said in blunt terms what has been implicit in several statements from leading figures in the last week: "We are in a world state of crisis," he told France Inter radio. "We face a risk of systemic crisis."
The crisis arose from "very high debt in Japan," and "American imbalances which are extremely deep despite plans to boost the economy which are not having much effect."
And in Europe there was "the crisis of sovereign debt," he added.