* FTSEurofirst 300 tumbles 6.8 pct, part of global slide
* Index hits lowest level since July 2003
* Oil stocks plunge as crude declines sharply
By Rebekah Curtis
LONDON, Oct 10 (Reuters) - European stocks tumbled nearly 7 percent early on Friday, swept into a global panic sell-off as investors feared world governments' efforts to thaw credit markets would fail to ward off a global recession.
Fragile banks led the decline, with Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) off 9.6 percent and Santander (SAN.MC: Quote, Profile, Research, Stock Buzz) down 7.1 percent. HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), a standout faller in Europe, dropped 13.7 percent.
Oil shares also tumbled, with BP (BP.L: Quote, Profile, Research, Stock Buzz) and Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) down 5 and 5.9 percent respectively as crude fell 4.3 percent.
At 0910 GMT, the pan-European FTSEurofirst 300 index was down 6.8 percent at 858.86 points, after falling more than 9 percent in early trade and hitting its lowest level since July 2003.
The index has fallen more than 21 percent so far this week, on track for its worst week on record, in a credit crisis that has frozen interbank lending, hammered banks and slowed the global economy.
European shares have dropped about 43 percent in the year to date.
World stocks slumped to their lowest levels in five years on Friday. Measures from the United States, Britain and other countries to fight the worst financial crisis in 80 years -- even this week's coordinated interest rate cuts -- have failed to calm credit and money markets and quell investor fears.
Finance chiefs from the Group of Seven rich nations meet in Washington later on Friday to discuss how to stem the crisis.
"The steps that have been taken thus far have yet to prove their worth," said Mike Lenhoff, chief market strategist at Brewin Dolphin in London.
"The bears are in their element at the moment," he added. "It's as if the financial system has lost its capacity to function."
Britain's FTSE 100 .FTSE lost 5.5 percent, France's CAC .FCHI lost 6.5 percent and Germany's DAX .GDAXI shed 8.2 percent. The major national indexes earlier fell as much as 10 percent.
Japan's Nikkei 225 .N225 fell nearly 10 percent on Friday, while Wall Street's Dow Jones industrial average .DJI shed more than 7 percent on Thursday.
Investors blamed the slide in U.S. stocks on Thursday on the expiry of a ban on short-selling of financial stocks, there was intense speculation on whether U.S. authorities would extend the restrictions.
DEFENSIVES SLIDE
Even traditionally defensive stocks failed to offer investors shelter in the stricken European market. Utilities tumbled, with E.ON (EONGn.DE: Quote, Profile, Research, Stock Buzz) the biggest individual negative weight in Europe, off 11 percent.
GDF Suez (GSZ.PA: Quote, Profile, Research, Stock Buzz) shares dropped 8 percent, extending Thursday's 13 percent fall after Belgian energy minister Paul Magnette told Le Soir newspaper of plans to cap electricity prices at subsidiary Electrabel.
Pharmaceutical stocks, usually seen as defensives, were not spared: AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) was down 5.5 percent, GlaxoSmithKline (GSK.L: Quote, Profile, Research, Stock Buzz) off 6.1 percent and Novartis (NOVN.VX: Quote, Profile, Research, Stock Buzz) down 5.7 percent.
Heavyweight stock Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz) dropped 7 percent.
Miners took a whipping as copper
Equity trading in Russia, Austria, Iceland, Romania, Ukraine and Indonesia was halted while nearly half of Milan stocks were suspended for excessive losses.
"It's just a panic ... investors are deciding: 'This is the time at which were going to throw in the towel'," said Peter Dixon, an economist at Commerzbank in London. "As one of my colleagues said: 'Game over please insert coins'." (Editing by Paul Bolding)
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