The profit-takers swung into action in Frankfurt, reversing a five-day rally of more than 5 per cent and sending the Xetra DAX index down 74.65 or 1.4 per cent to 5,164.95.
There were a number of firm features, however. BASF rose €1.44 to €32.95 amid tentative take-over talk and Man, boosted by an upgrade from Goldman Sachs, rose €9.48 to €243.03.
Deutsche Telekom lost €1.85 at €39.14 after a downbeat statement from Sprint about costs at Global One, its joint venture with Telekom and France Telecom.
Preussag came off €31.20 at €449 after the diversified tourism group put out a earnings statement that included plans for a rights issue.
Paris succumbed to profit-taking as analysts said the market had absorbed the news of the Paribas-Societe Generale deal and was now marking a pause after Monday's gains. The CAC-40 settled 60.35 lower at 4,243.57.
Renault slipped €3.30 or 6.7 per cent to €46 as investors cashed in on the stock's strong January performance. The company had surged on reports of good December and January sales which investors now think marked the peak of the sector's cycle.
France Telecom lost €4.30 to €82.50 on lower-than- expected quarterly profit from Sprint of the US. The company blamed expenses from its Global One venture with Deutsche Telekom and France Telecom.
Banking stocks pared earlier gains, with CCF down €5.80 or 6.6 per cent to €82.50 after a French broker cut its recommendation. Paribas fell €2.05 to €90.10 and Generale €3.60 to €149.40. BNP was off at €77.
Amsterdam ended 7.22 or 1.3 per cent lower at 532.79 in a session marked by heavy options trading and steep falls for Aegon and Unilever. Aegon shed €1.90 or 1.9 per cent at €96.70 while elsewhere among financials ABN Amro lost 15 cents at €17.70 in 10.8 million shares traded and ING fell €1.35 to €52.75.
Telecoms group KPN provided the steepest fall, ending €2 or 4.2 per cent lower at €46. Software newcomer Seagull ended at €17.20 against a €15 flotation price.
Madrid ended lower in slim volume, reflecting the negative mood in European markets. The general index closed 4.06 off at 880.06.
Retailers bucked the trend with hyper-market chain Pryca up 43 cents to €21.39 and rival Continente adding 35 cents at €26 as investors sought refuge from a turbulent global economy.
Milan was lower after a subdued session which saw BCI and Banca di Roma pull back from early highs in spite of continuing hopes that they could soon announce progress on a long awaited link-up.
