French banks rattled by crisis

PARIS, Aug. 10 (UPI) -- Bank shares in France were hit hard Wednesday on the CAC 40 blue-chip index as exposure to government debt has rattled investor confidence, analysts say.

"Volatility is very high. We're in quasi-crisis mode," The New York Times quoted David Thebault, head of quantitative sales trading at Global Equities, as saying.

"The markets are reacting to any little rumor," he said.

On Wednesday, share values for Societe Generale, the country's second-largest bank fell 21 percent, before recovering somewhat, closing with a loss of 14 percent. Shares of BNP Paribas, the country's largest bank, fell 9.5 percent, the Times reported.

French President Nicolas Sarkozy Wednesday disrupted a vacation to fly back to Paris for an emergency meeting to review "the economic and financial situation."

Sarkozy and others are concerned French bank exposure to European debt, including Greece, Italy and Spain, could threaten its triple-A credit rating.

White House press secretary Jay Carney said President Barack Obama has "spoken in recent days" with Sarkozy, German Chancellor Angela Merkel, Italian Prime Minister Silvio Berlusconi and Spanish President Jose Luis Rodriguez Zapatero.

"So we obviously are monitoring these events very closely and we continue to believe that the Europeans have the capacity to deal with this problem," Carney said.

Confidence, however, is no longer a given. "It boils down to a crisis of confidence. We haven't seen policymakers come out with a plan that is viewed as comprehensive, coordinated and credible," said Philip Finch, global bank strategist for UBS.

Although not as deeply mired in debt as Greece, Spain or Italy, forecasts put the deficit in France as reaching 85.4 percent of the country's gross domestic product this year.

"You're not getting confidence restored by policymakers. Most of them are still on holiday. We need confidence restored and there's still a lot of infighting," Finch said.