Financials were under strain as investors assessed the impact of Enron's bankruptcy and the banking restrictions in Argentina, where Spanish groups are heavily represented.

Dutch financials group ING led the retreat after Friday's warning that the company would lose a larger-than-expected $195 million if Enron collapsed. ING fell 2.7 per cent to €28.40.

ABN Amro, which said it might have to take a €110 million provision because of its exposure to Enron, fell 2.5 per cent to €17.70.

Insurer Aegon, whose total loan exposure to Enron was around $300 million, dropped 0.8 per cent to €29.50.

German insurers were also hit by concerns over their exposure to Enron. Allianz fell 1.7 per cent to €259.50 and Munich Re lost 1.4 per cent to €294.50.

Spain's BSCH dipped to a low of €9.10 before picking up to close 0.2 per cent higher at €9.54 as Argentina's controls on cash movements, to stem the flow of money out of the country, raised concerns about its holdings of Argentine debt. Its rival, BBVA, fell 1.1 per cent to €13.59.

Finnish chemicals group Kemira plunged after the government bowed to political pressure and backtracked on plans to sell the company to Sweden's Industri Kapital. Opposition to the sale had been pressed by some politicians and unions, primarily because of concerns about the future of Kemira's fertiliser division, Agro. Kemira's shares fell 25.4 per cent to €6.23, sharply below its high for the year of €8.75 on August 31st, when Finland said it would sell its 56.2 per cent stake at €9.10 a share.

The shockwaves spread to a raft of other Finnish companies with sizeable state ownership. Telecoms operator Sonera, which is 53 per cent state owned, fell 3.1 per cent to €5.61, although the fall may have been influenced by selling by investors who received shares in the group's rights issue last month. Bancassurance group Sampo fell 1.6 per cent to €8.65.