European Stocks Plunged, Led by French banks

European stocks tumbled Wednesday with growing fears (and rumors) that France’s AAA rating might be downgraded. Markets fear that The French banks have been heavily exposed to Greek and Italian debt. There are also worries over the sustainability of the debt in the euro zone. Even now there are speculations over whether France will be the next country hit by the European debt crisis following Italy and Spain.

French President Mr.Sarkozy has cut short his holiday to hold an emergency meeting on Wednesday on what actions should be taken to reduce the deficit. French banks led the fall in French Stock Exchange, with a 14.7% drop for Societé Generale, 9.5% fall for BNP Paribas. The CAC40 fell by 5.5% to 3,002.99.

Shares of French nuclear group AREVA tumbled 11.1% on Monday and fell down by 6.569 % to 20.765 euros on Wednesday after being placed on negative watch list by rating agency Standard and Poor’s. The S&P changed Areva’s note from stable to negative keeping its long term note BBB+  and its short term note A-2.

The rating agency points out that there are uncertainties in the nuclear industry following the Fukishama disaster and the German government’s decision to stop the production of nuclear energy by 2022.

Here is how other European stock markets performed:

London FTSE 100 dropped 3.05% and closed at 5007.16.

Frankfurt the DAX fell by 5.13 % and closed at 5613.42.

Milan stock exchange went down by 6.65% and closed at 14,676.04.

Is Cyprus the next country to be bailed out?

Fitch rating agency cut Cyprus’ credit rating two levels to BBB. Fitch stated that it might downgrade further if the government does not take the necessary austerity measures.