The Iseq index of Irish shares finished 2007 at 6,934, down some 26 per cent on the year, making it the worst performing exchange in Europe last year.

Despite the Dublin market closing early on New Year's Eve the Iseq index was down another 16.57 to cap a dismal year for the Irish Stock Exchange. It lost €26 billion in value over the course of the year.

The Iseq opened 2007 at 9,537 and reached a record high of 10,041 on February 21st. The lowest point came on November 22nd when the Iseq fell to 6,281.

The index of Irish shares had the second-largest slump among 90 global benchmarks tracked by Bloomberg. Investors turned sour on the Irish market largely due to its domination by financial and property-related stocks, which between them make up about 60 per cent of the Iseq.

Irish Life and Permanent shares were the poorest performing of the major financial stocks, closing at €11.81, down 41.4 per cent over the course of the year. Bank of Ireland's share price closed at €10.19, a drop of 38.67 per cent on the year, while Anglo Irish Bank was down 29.2 per cent and AIB down 27.9 per cent.

While the Irish market is not alone in feeling the impact of the global credit crunch, it has suffered more than its peers. Britain's FTSE 100 index had its worst performance since 2002 but was still in positive territory. It closed the year at 6,456.9, up just 236.1 points or 3.8 per cent.

The Dow Jones Stoxx 600 index of European shares posted its first annual decline since 2002, as benchmarks in Britain and France dropped on the last day of 2007 trading.

For the full year, Germany's DAX index led gains among Europe's 18 national measures with a 22 per cent advance.

"We remain cautious for stocks in 2008 even if we still expect positive economic growth," said Emmanuel Soupre, a fund manager at Neuflize Gestion in Paris, which oversees about $15.6 billion.

"The question is, was 2007 the end of the bull market that started in 2003 or just a breather to gain more upside strength? The answer is not a clear one at this point."

(Additional reporting: Bloomberg)