GERMAN Chancellor Angela Merkel will seek backing from German lawmakers to bolster the euro bailout fund on the same day she heads to a European summit as banks joust with leaders over the size of losses they take on Greek bonds.

The uncertainty over Greece has hit markets around the world, with the Dax in Frankfurt and the CAC 40 in France both down around 3%, while Asian markets also suffered sell-offs overnight.

London’s leading shares index fell 4.5% today – the 12th biggest points fall in its history – amid fears the world is sliding into a double dip recession.

World markets continued their rally today after eurozone leaders agreed a new €109bn rescue deal for debt-laden Greece, allaying fears of the collapse of the single currency.

Expectations that UK interest rates will stay on hold until well into next year were reinforced today after the Bank of England highlighted increased fears about the strength of the economic recovery.

The FTSE 100 Index slumped more than 2% today after markets across the globe were shocked by a downgrade of the US government’s debt outlook.

The pound was at a six-month low against the euro today amid mounting expectations for the Bank of England to pump more money into the economy.

THE pound and the dollar continued to fall against the euro yesterday but small firms will suffer if the euro continues to grow in strength.