London stocks plunged on Tuesday amid growing political unrest in Europe, with the FTSE 100 down by around 1% points, marking its worst session in around two months.
Credit ratings agency Moody's warned President Emmanuel Macron's snap election could lead to a downgrade for the French government, sending bank shares on both sides of the Channel lower.
France's government was warned by the rating giant that "potential political instability is a credit risk", especially in a country where the “debt burden is the highest among similarly rated peers”.
Macron called the surprise vote over the weekend after his party suffered heavy defeats to the right-wing group National Rally in the European Parliamentary elections.
Should Macron's party lose control of parliament to the French National Assembly economists have expressed concerns that the government will significantly increase spending.
This would add to the current deficit faced by the French parliament, which at the end of 2023 stood at 110.6% of GDP.
Moody's believes that if National Rally seize power spending could rise to 115% of GDP within the next three years, which would leave the country "more susceptible to a rising cost of funding."
Analysts at the New York firm said: “The outlook, and ultimately the ratings, could move to negative if we were to conclude that the deterioration in debt affordability – which we measure as interest payments relative to revenue and GDP – will be significantly larger in France than in its rating peers.”
Societe Generale slipped 4.3%, while BNP Paribas dropped 3.9%. The effects were also felt in London, with Standard Chartered falling 3.8%, while HSBC, NatWest and Barclays slipped around 2.5%.
Also pushing the index lower were falls from mining companies like Glencore and Antofagasta, down 3% and 4% respectively after copper and iron ore prices took a hit.
Rio Tinto also slumped 2.5% after it revealed it was set to buy Mitsubishi's 11.7% stake in Boyne Smelters.