The FTSE-100 Index closed 4.7% lower, while US stocks slid for the second day, with the Dow Jones industrial average at one point dipping to its lowest level in more than a year.
The Prime Minister put his name to a letter to France, the current G20 president, warning the path out of recession would be “difficult” and arguing the world’s largest economies must agree at the Cannes G20 summit in November to work together to increase global demand without creating unsustainable imbalances.
The letter, also signed by the leaders of Australia, Canada, Indonesia, Mexico and South Korea, warned: “The barriers to action are now political as much as economic. We must send a clear signal that we are ready to take the actions necessary to maintain growth and stability for all.”
Christine Lagarde of the IMF also urged nations to work together to meet the growing risks, acknowledging that the global economy was entering a “dangerous phase”.