BBC News with Gaenor Howells

Stock markets in Europe and the United States have fallen sharply with concern that the eurozone debt crisis could spread to Italy and Spain. The falls came despite

intervention

s by policymakers aimed at restoring calm. The markets in London, Paris and Frankfurt were all down by more than 3%. In the United States, the Dow has closed down 4%. Caroline Hepker reports from New York.

Disastrous was the way one trader on the floor of the New York Stock Exchange described the drop in US shares on Thursday. The reason for the stock market rout is a combination of fears over the sovereign debt crisis in Europe and growing concern about the US recovery. There has been a string of worrying economic data in America in recent days: economic growth slowed to a

trickle

this year; consumer spending fell in June, and both the manufacturing and the service sector are

sluggish

.

A court in France has approved an investigation into allegations that the new head of the International Monetary Fund, Christine Lagarde, abused her position when she was the French finance minister. The case

centres on

a $400m compensation payment to a businessman. From Paris, here's Christian Fraser.

In 2008, just months into the job as the first female finance minister of France, Christine Lagarde used her powers to bring to an end a court battle that had run for years. Bernard Tapie, a wealthy businessman and controversial figure here in France, had accused the former state-owned bank Credit Lyonnais of mishandling the sale of his share in the sportswear manufacturer Adidas. Prosecutors allege she went beyond her powers,