The Bucharest bourse's index fell 3.5 percent to its lowest levels in two years, while other Central European indices dropped much less, with fears over global economic growth also weighing on sentiment in emerging markets.

Just four days ago, the Bucharest index was Central Europe's best 2018 performer, with an over 10 percent year-to-date gain. But by Friday it was almost the worst, down nearly 9 percent from the end of 2017 and lagging behind only Sofia's 12 percent fall.

The Romanian government will meet at 1630 GMT to approve shock measures announced late on Tuesday to keep the budget deficit at bay, and the details will be closely watched in markets.

The emergency decree will enforce a bank tax but also cap gas prices and introduce a turnover tax for energy and telecoms firms, as well as enabling Romanians to withdraw from a mandatory private pension scheme.

The market tremors ran through the region, hitting the shares of banks including Austrian-based Erste and Raiffeisen and Hungary's OTP.

Local lender Banca Transilvania shed 4.2 percent. State-owned nuclear power producer Nuclearelectrica's stock fell as much as 18 percent.

"All in all, the desperate fiscal measures are clouding business prospects," Citigroup said in its weekly note on emerging markets. It said dampened credit lending could offset the additional inflation pressure from higher taxes in the energy, telecoms and tobacco sectors.

Romanian government bond yields, which jumped after the announcement but had retreated by Thursday, were mixed on Friday.

Hungary's 10-year government bond yield, meanwhile, tested its lowest levels since early June, dropping 9 basis points from Thursday's fixing to 3.09 percent.

The fall was fuelled by a more than 30 basis point slump in long-term asset swap yields which started late on Thursday, a Budapest-based fixed income trader said. "A few overseas investors are arranging positions... even though a strong inflow of EU funds may have also played a part," the trader said.

"After this, I expect swaps to correct upwards rather than spot yields to follow the decline," the trader added.

Poland's 10-year yield also continued to decline. Dropping by 2 basis points to near 2.84 percent, it reached its lowest level since September 2016.