Short-Selling Ban Will Not Deter Bears: Analysts

A 15-day short-selling ban, which was implemented on Friday across several European countries, has attracted opprobrium from market participants, who see the restrictions as a superficial move that will do little to solve the underlying problems of the euro zone and stop market turbulence.

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The majority of the comments from European traders who spoke to CNBC.com on Thursday were not fit for publication.

Regulators hope that the ban on short-selling in France, Italy, Spain and Belgiumwill reduce speculative action and curb the aggressive sell-offs that have hit markets over the past week.

"There is absolutely no evidence that it will achieve what they want it to achieve," Nick Carn, founder of Carn Macro Advisors, told CNBC on Friday.

"It's a gesture to try and indicate that the problems are due to some kind of evil conspiracy of one type or another, part of the process that says that speculators are driving down the price of Greek debt or Italian debt. It's trying to create the same class of person to whom you can then attribute your problems," he said.

One trader told CNBC.com that currencies could take the hit as the market looks to sell the next most liquid proxy.

European markets turned bearish on Thursday as they struggled to shrug off rumors circulating around banks and sovereigns, despite strident denials from chief executives and rating agencies.

Market participants were swapping rumors around the major French banks, particularly Societe Generale , which issued a statement on Wednesday "vigorously" denying market speculation around the size of its exposure to Greek sovereign debt.

U.K. newspaper the Mail on Sunday, sister paper of the Daily Mail, had reported that SocGen, as well as Italian giant Unicredit , were on the verge of collapse. It later withdrew the article and apologized, saying: "We now accept that this was not true and we unreservedly apologise to Societe Generale for any embarrassment caused."

Rating agencies came out to reiterate their top rating of French debt as speculation around a downgrade swirled and market concerns moved up the food chain from peripheral euro zone economies to the core.

Nicolas Sarkozy hasgiven lawmakers a week to come up with renewed plans to solve the country's sovereign debt mountain, currently around 85 percent of gross domestic product.

A possible increase in size of the European Financial Stability Facility (EFSF), a bond issuing mechanism backed by the euro zone core to bail out struggling members of the periphery, could increase pressure on French sovereign debt, analysts said. This is adding to negative sentiment in the market, participants told CNBC.com.

In Germany, Commerzbank saw its profits wiped out by provisions for a sovereign default in the periphery, but sources suggested to CNBC.com that the German markets had mostly priced in concerns around the banking sector and around any potential size increase in the EFSF.

“The market is now in the process of thinking through the implications of Germany and France putting their balance sheets on the line to save the euro," Carl Astorri, global head of economics and asset strategy at Coutts, told CNBC.com on Thursday afternoon.

"This looks to be the end game that we are heading towards, and hence the (credit-default swaps) for these two countries are rising. Because of the fiscal strain of saving Italy and Spain, France and Germany will have to run their government budgets tighter than they would otherwise, which is negative for their economic growth outlooks. Slower growth would be bad for the banks of these countries, as would any downgrade of their government debt," he said.

"Confidence in all matters European is extremely low," Rupert Watson, head of asset allocation at Skandia Investment Group, told CNBC.com. Although the European Central Bank (ECB) has succeeded in bringing Spanish and Italian yields down, the ECB is only doing so reluctantly and hopes to pass the baton on to the EFSF.

"The EFSF, while large is not large enough to fund Spain and Italy over the next couple of years. As a result, markets are uncertain what would happen if the EFSF runs out of funds. In addition, the EFSF has yet to receive parliamentary approval in each member state. Approval is not likely until the end of September at the earliest," he said.

"What is missing is confidence and leadership. Both are lacking at the moment and until they return, markets will be vulnerable to fear and speculation. European equities are undeniably cheap, but with markets moving as rapidly as they are, few are focusing on that at the moment," Watson added.

Despite the denials and assurances, French and German markets continued to fall. Several analysts told CNBC.com that while the moves seemed irrational, and even though SocGen had reaffirmed its financial stability, there was a sense of inevitability developing in the market.

As Astorri said, “Bank runs are never stopped by bank CEOs denying them. Once you have to deny that your bank has problems you are probably already dead."