Howard Archer, chief UK and European economist at IHS Global Insight, said: "The key factor going forward is how quickly a new government can be formed and how well equipped it is perceived to be to have a very real chance of taking, and getting through, the necessary strong action to rein in the public finances."

"The longer that any horse trading goes on between the parties after the final result is known, and the more fragile any agreement is perceived to be, the more that sterling, gilts and equities are likely to suffer." In Greece, borrowing costs hit a record high today, as the financial rescue package for Greece being put together by Europe and the IMF failed to rally investor support.

"The eruption has changed back to an explosive eruption, lava has stopped flowing and most of the magma gets scattered due to explosions in the crater," said the statement in English. "The ash plume rises high above the crater (4-7 km) and considerable ash fall can be expected in wind direction. No signs of the eruption ending soon."

Fisher, an expert in high-speed, electronic trading, made a rare appearance on the business news channel to sound the alarm. "Humans can't keep up," he said. "There is no way this is not going to happen again if we don't slow this down. This is a warning to everybody."

CNBC, citing multiple sources, reported that a single trader at banking giant Citigroup made a human error, possibly by erroneously entering the value of a single trade. Such errors are known on Wall Street as "fat finger" trades, because the error can be as simple as a trader pressing the wrong button.

CNBC's David Faber reported that the trader entered an order for a so-called E-mini - an S&P futures contract - at 16 billion units when it should have been 16 million. Citigroup said it was investigating but had not immediately found evidence of such an error. If a fat finger trade did contribute to Thursday's free-fall, it recalls a similar incident - on a much smaller scale, of course - that occurred on the Tokyo Stock Exchange in 2005, when a trader's typing error cost one of Japan's biggest brokerage firms $225 million and disrupted markets there.

The problem is that in this era of high-frequency, automated trading, such a single human error could have catastrophic consequences. Add fears over Europe, and you have a recipe for disaster. Gerard Cassidy, an analyst with RBC Capital Markets, told The Wall Street Journal that a drop of nearly 1,000 points is "people jumping out of windows" territory.

As the The Journal's Evan Newmark noted: "It's a safe bet that after the trader's initial error, high-frequency trading computers remorselessly running their algorithms took over." He added: "I'd be amazed if 'high-frequency trades' don't account for the vast majority of the executions that took place between 2:15 and 3:00 pm at the New York Stock Exchange.

The slide, which in one 10-minute stretch knocked the index down nearly 700 points, may have been triggered by a trading error. Major stock indexes eventually recovered from their 9 percent drops to close down a little more than 3 percent. But the follow-through selling that pushed stocks of some highly regarded companies into tailspins exacerbated concerns that regulators can quickly lose control of the markets in a world of algorithmic trading.

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today," Senator Edward Kaufman said in a statement. "The battle of the algorithms - not understood by nor even remotely transparent to the Securities and Exchange Commission - simply must be carefully reviewed and placed within a meaningful regulatory framework soon."

Kaufman and Senator Mark Warner - both Democrats - said Congress needs to investigate the causes of the market plunge, which at its deepest point wiped nearly $1 trillion off equity values. Investors had already been on edge throughout the trading day after the European Central Bank did not discuss the outright purchase of European sovereign debt as some hoped they would to calm markets.

But she admitted that the Commission had no power to punish returning officers responsible for the chaos, and attempted to dodge any personal blame by suggesting the "Victorian" electoral system was at fault. Miss Watson, who worked at a series of quangos before joining the independent electoral regulator in 2009, said: "Electoral law is very clear. The doors must be shut at 10 o'clock and anyone issued with a ballot paper before 10 o'clock must be allowed to vote. No-one can be issued with a ballot paper after 10 o'clock even if they are inside the polling station.

"The returning officers should have done what the law says. If they haven't done that they may well be subject to election petitions." Asked why there had been so many problems, Miss Watson blamed everyone but herself. She said: "This is a significant concern. They will have to answer to us and they will have to answer to the local voters. They should have put extra staff on and got extra ballot papers if they were running out. It's largely a legacy of the Victorian era. It's not sensible to have a system that was designed when five million people were eligible to vote."

David Dimbleby, the BBC's election night anchor, described the election as a "third world" ballot. In a statement, the Electoral Commission said: "It is a cause for serious concern that many people who wanted to vote today were unable to do so by 10pm when polls closed. The Commission has repeatedly faced criticism over its record. It previously failed to crack down on postal voting fraud. It is also responsible for overseeing party finance but failed to notice that the Labour Party had funded its 2005 election campaign with secret loans."

Merkel, whose Christian Democrats face a tough re-election battle in Germany's most populous state on Sunday, railed against gamblers on the financial markets who she said were exacerbating an already volatile situation.

"First the banks failed, forcing states to carry out rescue operations. They plunged the global economy over the precipice and we had to initiate recovery packages. Because of these packages, we have become indebted and now, they are speculating against these debts - that is really very treacherous," she said.

"Governments must regain their supremacy over the markets, which they no longer have, and for that we need much stricter global rules," she added, at a debate on Europe organised by a public broadcaster. Merkel said it was now up to the European Union member states to reassert their authority and shore up the financial rules governing the bloc.

"We must clearly demonstrate that in Europe we have the political power, each in his own country, of getting back on the track of the Stability and Growth Pact," she said.

At the height of the panic, one trader, on the condition of anonymity, said he heard fixed-income desks in Europe shut down early because there was no liquidity - basically European banks are halting lending right now. "This is similar to what took place pre-Lehman Brothers," the trader said.

Just before the panic started, which was around 2:30pm ET, Mohamed El-Erian said on CNBC that the Greek crisis is about to spread. "We've seen a crisis start in a country - Greece - become regional, impact the whole of the Euro zone and is on the verge of truly going global," said El-Erian, CEO of the world's biggest bond fund.

Rochdale analyst Dick Bove said the riots in Greece, which escalated after the Greek austerity bill was passed, are also a telling sign.

"There is simply a growing recognition that Greece has got to default," said Rochdale banking analyst Dick Bove. "The riots in the streets showed the decision to repay the debt was not going to be made by the people in Germany, France and Switzerland, it's going to be made by people in Greece and they're not going to repay it," he said. "Anyone seeing the riots is going to recognize that this government is going to be thrown out and anything replacing this government is going to be far more leftist leaning and they're going to repudiate."

At one point the Dow Jones was down by more than 9%, its worst fall since 1987, before starting to recover. At close in New York the Dow Jones was down about 3.20%, the S&P down 3.24%, and Nasdaq 3.44%. The BBC's Business Editor Robert Peston said the market panic had been precipitated by "fear of a knock-on from Greece and other European countries on the global financial system".

Computer trading is thought to have cranked up the losses, as programmes designed to sell stocks at a specified level came into action when the market started falling. "I think the machines just took over," said Charlie Smith, chief investment officer at Fort Pitt Capital Group. "There's not a lot of human interaction. We've known that automated trading can run away from you, and I think that's what we saw happen today."

As polling stations around Britain opened at 7am today, latest UK opinion polls suggest David Cameron is within touching distance of achieving a working majority. But while polls still pointed to a hung Parliament, economists warned that Britain could ill-afford a period of political uncertainty.

The need for decisive leadership was underlined by official figures showing the UK's budget shortfall will be the biggest in the EU this year - even overtaking Greece. With 'contagion' from Athens threatening to spread through other debt-laden economies, David Cameron made a last-ditch plea to voters to back a strong Tory government.

He told the Daily Mail that unless Britain 'rolled up its sleeves' and got on with paying off its deficit, it risked an economic crisis.

'This is the most important election any of us can remember,' the Tory leader declared. 'We need to get on and take decisions, not haggle and bicker.'

But Gordon Brown rejected any comparisons between the two countries. 'Greece is in a different stratosphere as far as debt is concerned,' he insisted. The frenetic last day of campaigning was overshadowed by events in Athens, where crowds fighting deep emergency budget cuts torched government buildings and banks and tried to storm parliament.

Police were attacked with firebombs, paving stones and chunks of marble hacked from historic buildings. They hit back with stun grenades and tear gas. The rioting spread to the northern city of Thessaloniki as a 24-hour general strike brought the country to a halt.

American investors got a sampling this week of what further deterioration in the euro zone could taste like. On the good side, investors rushed into perceived harbors - the dollar and Uncle Sam's own debt. On the bad side, the swoon in prices of American shares and corporate debt indicated the long reach of a foreign crisis.

Looking forward, an encumbered euro zone economy isn't good news for global growth, an essential ingredient in the still developing US economic recovery. A new European recession would slow demand for American exports, which would be less competitive in any case, thanks to the crisis-strengthened dollar. Then there is the interconnected global financial system. Few envisioned that lax lending standards for subprime loans would start a chain reaction that ended with a global crisis and recession.

The European Union is trying to keep its problems local, by helping Greece and stamping out brush fires breaking out in Portugal and Spain. But troubles could spread rapidly, especially if European politicians balk at offering aid or some banks begin to buckle under their sovereign debt holdings. In a complex system, the woes might rapidly cross borders and oceans. The International Monetary Fund's involvement in the bailout also means that the United States is stretching itself further. As the largest shareholder in the fund, it is effectively lending Greece money when private markets will not.

Of course, the US government benefits from the crisis in one important way - at least for a while. If Europe were sound, investors would probably be more worried about the American fiscal deficit of $1.5 trillion, even if the latest budget news is more positive. Unfortunately, the ease of placing government debt could give policymakers the idea that huge deficits don't matter. They will, though, a crisis or two from now.

But Saturday's failed terrorist bomb in the Times Square tourist hot spot has provided the authorities with a new argument for expanding a sometimes controversial security blanket of cameras, sensors and analytical software. The system "will greatly enhance our ability and the ability of the police to detect suspicious activity in real time, and disrupt possible attacks," Mayor Michael Bloomberg said Monday.

The high-tech system, modeled on the "ring of steel" in London's financial district, is already in service in lower Manhattan, where Wall Street and the World Trade Center reconstruction site are located. Headquartered at 55 Broadway, the Lower Manhattan Security Initiative goes far beyond the traditional hodgepodge of police cameras, such as the 82 devices installed around Times Square.

Instead, an integrated system maintains an unblinking eye, not just watching, but constantly collecting license plate numbers and video of pedestrians and drivers, as well as detecting explosives and other weapons. An important component of the program is coordination between the police network and private business cameras, something that has not been established in Times Square, causing detectives significant extra work.

Also, a separate, but similar program called Operation Sentinel plans to log every vehicle entering Manhattan Island by scanning their license plates and checking for radiation.

Petrol bombs were thrown at police who responded with pepper spray, tear gas and stun grenades. Protesters are angered by spending cuts and tax rises planned in return for a 110 billion euro (95 billion pounds) bail-out for Greece. Parliament is to vote on the measures by the end of the week.

Measures include wage freezes, pension cuts and tax rises. They aim to achieve fresh budget cuts of 30 billion euros over three years, with the goal of cutting Greece's public deficit to less than 3% of GDP by 2014. It currently stands at 13.6%. Outside parliament, a group of protesters rushed up a flight of steps, taunting MPs to come out and calling them "thieves".

Riot police forced them back, but right next to parliament, others groups set buildings on fire - including a tax office. The Greek protesters' ire is aimed against symbols of capitalism, says the BBC's Malcolm Brabant in Athens. Chancellor Angela Merkel urged MPs to back the emergency loan package agreed by European finance ministers at the weekend.

It requires Germany to pay the largest proportion of the loans. "Quite simply, Europe's future is at stake," she said. The EU has agreed to provide 80 billion euros (69 billion pounds) in funding - of which around 22 billion euros would come from Germany - while the rest will come from the International Monetary Fund (IMF).

Last month, ash clouds from the same volcano grounded flights for six days. The situation in the skies has been changing hour by hour and the no-fly zone will be re-assessed by the CAA at 1900 BST. Forecasts show the 60-nautical-mile buffer zone imposed around high concentrations of ash is close to some airports in northern England.

However, the latest advice issued by the CAA said airports in north-west England could safely stay open on Wednesday. It added that south-east England was unlikely to be affected. The fresh disruption on Tuesday came as European Union transport ministers met in Brussels to agree measures they hoped would help prevent further disruption to air travel as a result of volcanic ash.

The steps include speeding up current plans to integrate Europe's airspace, creating a "single European regulator for a single European sky". The meeting came after criticism from the airline industry that governments took an over-cautious approach to April's ash cloud crisis and grounded flights unnecessarily.

It came as Greece was paralysed by a nationwide general strike on Wednesday - the first major test of the socialist government's resolve to push through unprecedented austerity cuts needed to avert a fiscal meltdown. The euro continued to weaken against the dollar in Asian trading, hitting $1.2958, as investors doubted whether 110 billion euros (95 billion pounds) of loans from the European Union and the International Monetary Fund could stop contagion to other vulnerable countries such as Spain and Portugal.

Investors are worried that these countries may need even larger debt bailouts. Hong Kong's Hang Seng fell 2pc, while China's benchmark index in Shanghai dropped 2.1pc. Australia skidded 1.9pc, Indonesia slid 1.5pc and Singapore sank 1.2pc. Markets in Japan, South Korea and Thailand were closed for holidays. Earlier, Wall Street's Dow Jones index fell 2pc, dropping beneath the critical 11,000 point mark to close at 10.927.

The falls were even sharper in Europe, where Madrid's key stock market index was down 5.4pc, Lisbon's down 4.2pc, Paris's CAC fell 3.6pc, London's FTSE 100 skidded 2.6pc and shares in Frankfurt gave up 2.6pc. The falls, which could continue today, more than reversed the rallies on Monday after the eurozone leaders and IMF confirmed their bail-out of the Greek economy. They are a sign, according to analysts, of more deep-seated concerns about peripheral eurozone economies.

Britain's role as a bridge between the United States and European Union has diminished and that trend will accelerate if the May 6 vote is inconclusive, with Washington looking more and more to the European Union as a whole as a global partner.

Opinion polls point to a hung parliament where no single party has a clear majority, the first since 1974. Post World War Two politics have been dominated almost without interruption by left-leaning Labour and right-leaning Conservatives.

While Britain and the United States remain close on issues such as intelligence, the war in Afghanistan, how to handle Iran, free trade and economic issues, experts say both countries appear to be altering overall expectations of their alliance. The term "special relationship" was coined in a 1946 speech by Winston Churchill to describe ties binding two countries that battled side by side to liberate Europe in World War Two. "There's a sense that the UK doesn't enjoy the pride of place it used to in Washington," said Charles Kupchan, international affairs professor at Georgetown University.

"The biggest concern in Washington would be that the UK ends up with a dysfunctional government. The general view from Washington is that the US needs a strong European partner, and that a strong European partner depends in part on a strong British government." Even leaving the election to one side, relations between the United States and Britain have lost some of their luster. Former Labour Prime Minister Tony Blair was scorned in Britain as President George W Bush's "lap dog" for sending British troops to fight in the US-led war in Iraq.

"Relations are rather 'unspecial' at the moment."