In Frankfurt, the Dax index finished the afternoon electronic trading session with a loss of 5.4 percent after being down as much as 6 percent.
German banks are big lenders to Russia, which this week devalued its ruble and suspended debt payments. The crisis has fueled considerable negative sentiment in German markets.
In London, Europe's biggest stock market, the Financial Times-Stock Exchange 100-share index finished 3.4 percent lower. In Paris, the CAC 40 index closed with a loss of 3.5 percent.
Prices were falling sharply even before a new sell-off on Wall Street aggravated the situation late in the European trading day.
The expiration of August options on German stocks also contributed to the decline in Frankfurt.
Sentiment was bearish from the start, following a drop Thursday in New York, lower prices Friday on the Tokyo and Hong Kong markets and persistent concerns about the fallout from the Asian crisis.
Traders cited concerns over factors ranging from the U.S. military strikes on suspected terrorist targets in Afghanistan and Sudan to the possible devaluation of Venezuela's currency.
"The uncertainty is adding up," said Regis Khaber, an analyst at the Aurel brokerage in Paris.
Many investors were moving money out of stocks and into the safer haven of bonds amid all the gloom, including fears that many Russian banks might fail.
"People are really flying into quality," said Bart Peters, a bond trader at Cera Investment Bank in Brussels.