European stocks, euro slide despite Spain reform pledge

European stocks slumped Monday despite a big election win for Spain\'s centre-right as Moody\'s warned France that its top credit rating was at risk and Poland urged the ECB to step in to avert \"catastrophe.\" The Frankfurt and Paris stock markets tumbled more than 2.0 percent in early trade and the euro slid to $1.3458 from $1.3519 on Friday in New York in a broad-based sell-off which hit all involved. Sentiment was also hit by reports that the latest efforts to find a long-term solution to the US debt crisis faced failure Monday, as lawmakers remained at odds over cutting social programs and raising taxes on the rich. A bipartisan supercommittee faces a Wednesday deadline to reach agreement but reports said the 12 Democratic and Republican members had already accepted there would be no accord, putting the US in the debt firing line as well. \"Equities are not a happy place to be right now with so many uncertainties shrouding the market,\" said Simon Denham, head of Capital Spreads trading group. \"The landslide parliamentary election victory ... in Spain seems to have appeased the bond markets for now but this morning\'s (stocks) sell-off is being driven by the wider concerns of the overall debt situation affecting not just Europe but the US as well. \"The foreign exchange traders are also in no mood for taking risks, so we have seen a hike in the safehavens that are the dollar and then yen,\" Denham added. In early European trad3, Frankfurt\'s DAX 30 tumbled 2.29 percent, the Paris CAC 40 shed 2.06 percent and London\'s FTSE 100 dropped 1.71 percent. Madrid retreated 1.90 percent and Milan slumped 2.40 percent. Asian shares closed mostly lower on Monday as markets awaited the outcome of key China-US trade talks amid simmering tensions between the economic superpowers. Markets also reacted to news Japan logged an unexpected trade deficit in October, while business hub Singapore predicted sharply lower economic growth next year. In Europe, Spain\'s right stormed to its biggest election victory ever on Sunday, winning over voters desperate for an end to soaring unemployment and the eurozone debt storm. Spain\'s government was the last to fall among the eurozone\'s so-called periphery nations this year after Ireland, Portugal, Greece and Italy all succumbed to a collapse of confidence in their sovereign debt. Mariano Rajoy, leader of the conservative Popular Party, won support from voters lured by his promise to fix the economy and create jobs, even if it means more austerity. European stocks fell sharply last week as Spain, Italy and France faced a sharp spike in borrowing costs. A rise in the borrowing rate on French debt bonds and possibly slowing growth could meanwhile have a negative effect on France\'s top AAA credit rating but not immediately, Moody\'s warned on Monday. Poland\'s finance minister said on Monday that the European Central Bank must intervene \"massively\" to buy the bonds of debt-wracked eurozone countries or Europe faces a catastrophe that could lead to war. Jacek Rostowski, whose country holds the rotating EU president, told German daily Frankfurter Allgemeine Zeitung: \"We have a hideous choice ... either a massive intervention from the ECB or a catastrophe.\" If the eurozone were to break up, \"we would lose a huge part of our economic output. There is a danger of a historic economic disaster -- like the Great Depression in the 1930s -- that would lead to war in Europe,\" he added. The ECB has come under increasing pressure to act as the so-called \"lender of last resort\" to bolster indebted countries and prevent the crisis spreading throughout the eurozone. The Frankfurt-based bank has refused, arguing that its sole responsibility is to protect against inflation, and has won the powerful backing of German Chancellor Angela Merkel. This week however sees the EU urging eurozone states to club together to guarantee each other\'s debts, vowing to police national budgets ruthlessly by way of a safeguard. The European Commission will on Wednesday publish legislative proposals to implement common eurozone bonds that could start with a club-within-a-club and only partial debt-pooling. That amounts to a direct challenge to the EU\'s most powerful economy Germany to open the door to radical cross-border integration of public finances. Berlin\'s status as Europe\'s safe pair of hands means it currently pays half the interest on its borrowings as France, and much, much less than Italy or other eurozone partners in trouble over their debt.