Disaster looms as French bank stocks plummet

French banks saw their share prices plummet over fears of an impending Greek default as Greece struggles to get its austerity plans back on track.

The spotlight fell on French banks this week. On Wednesday, ratings agency Moody's cut the credit ratings of France's Crdit Agricole and Socit Gnrale and threatened to do the same to BNP Paribas, France's biggest bank. French banks' share prices fell earlier in the week, partly on fears of a downgrade. On Monday Socit Gnrale's stock plummeted by 11%.

Greece appeared ever more likely to default and Italy was forced to pay the highest interest rates on a five-year bond issue since it joined the euro. The sense of drift among policymakers was reinforced by German chancellor Angela Merkel. She said Europe was doing its utmost to avoid a Greek default a few days after one of her ministers openly broached the idea of an orderly default as a way out of the crisis.

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