The DAX tumbled 5.3pc to 5,246.18, leading a rout of stock markets across Europe. In Paris the CAC fell 4.7pc, while the Stoxx Europe 600 index slumped 4.1pc to close at 223.45. Italian 10-year yields rose close to 5.6pc, their highest since early August.
Europe's emerging markets were also hit as febrile traders drove up the cost of insuring Romanian, Hungarian and Polish sovereign debt against default to new highs.
In Germany Angela Merkel's ruling party was given a drubbing in local elections. The results, which were seen as a protest against Germany propping up indebted eurozone countries, was an inauspicious start to a vital week.
On Wednesday a German constitutional court will rule on claims that Berlin is breaking German law and European treaties by contributing to bail-outs for Greece, Ireland and Portugal. The court is not expected to rule against the contributions, but may add conditions that could delay or hamper rescue plans.
Speaking in Paris, Jean-Claude Trichet, the head of the European Central Bank (ECB) warned of the "immediate and imperative need" for European countries to deliver the €109bn (£95.4bn) bail-out for Greece and the extra powers for the European Financial Stability Facility agreed in July. The package has been delayed by disagreement between eurozone members of lending conditions to Greece.
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