Frankfurt fell 2.3 per cent. Veba was the day's most active stock, sliding €1.40 to €55.75 after the news Veba and fellow utility RWE were selling their jointly owned cable TV unit. RWE lost €1.29 at €42.71.

The cloud that has formed over Deutsche Telekom following the failure of the merger with Telecom Italia deepened with the shares off a further 60 cents at €34.85.

Mannesmann slid €2.62 to €130.88 for a two-day decline of 4.3 per cent. Some frontline cyclicals came in for selling. Chemicals leader Hoechst lost €1.10 at €43.10 and engineer Linde shed €18 at €548.

Paris closed sharply down, hit by the euro's fall and early weakness on Wall Street. Valeo, the car parts maker, tumbled 4.4 per cent after BNP Equities dropped the stock from its recommended list. The decision, the latest in a series of downgrades by analysts, sent the shares down €3.70 to €80.80.

Alstom, the transport and engineering group, gained 25 cents or 0.9 per cent to €29 after several analysts raised their price targets. The group announced on Wednesday that its net income for last year was 32 per cent up on the pro forma figure for the previous year.

Amsterdam ran into renewed steady selling of financials and the AEX index ended off 6.77 at 553.13. ABN Amro shed 40 cents at €20.85 and Aegon came off €1.95 at €78.95.

Milan closed near to the session lows as Olivetti and Telecom Italia continued to dominate activity, accounting for half of blue-chip trading volume. The Mibtel index finished 317 or 1.3 per cent lower at 24,168.

Olivetti picked up from its lows, but still closed 54 per cent down at €3. Telecom Italia lost 1.1 per cent to €9.87.

Madrid gave back morning gains after a subdued start on Wall Street depressed blue-chips. The general index finished 8.14 or 0.9 per cent down 886.96. The financial sector suffered from this week's poor performance by banking stocks in the US.