FRANKFURT, Oct 10 (Reuters) - European shares plunged on Friday as investors dumped equities, notably financials, on fears that efforts by governments and central banks to breathe life into credit markets may not prevent a recession. The FTSEurofirst 300 index of top European shares closed unofficially with a loss of 7.8 percent to 849.29 points -- its lowest close since July 2, 2003. The pan-European benchmark fell as 9.9 percent earlier in the session and had its worst week on record with a drop of 22 percent. "The new lows we've seen in stock markets this week are the result of panic selling," said Joost van Leenders, asset allocation specialist at Fortis Investments. The DJ Stoxx European bank index fell 10.6 percent, with Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) down more than 20 percent while Credit Suisse CGSN.VX and Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) lost over 16 percent each. Insurance shares fell almost 10 percent, with Dutch ING Groep (ING.AS: Quote, Profile, Research, Stock Buzz) losing 12.7 percent. Investors across asset classes were awaiting the outcome of meetings in Washington involving Group of Seven finance ministers and central bankers, and the International Monetary Fund. "This is probably the most important G7 meeting ever. There will be considerable pressure to take decisive, co-ordinated action," Fox-Pitt Kelton said in a note. Markus Reinwand, equiy strategist at German bank Helaba, said it would depend on the political authorities whether the panic seen in the financial markets in the past few weeks would be replaced by a stabilisation phase. "All eyes are on the G7 meeting ... now that the national measures we've seen so far have failed to have any lasting effects there's demand for a coordinated approach from the big industrialised countries," Reinwand said. "The massive loss of confidence means that a further plunge cannot be ruled out," he said. (Reporting by Peter Starck)

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