PARIS: European stocks were lower early Wednesday afternoon as investors booked recent profits on banking stocks, worried that pressure on the European Central Bank to write down Greek bond holdings could compromise its ability to buy peripheral debt.

Telecom gear makers also took a beating after Ericsson  missed profit and sales forecasts and said network operators will likely remain cautious on spending. 

Ericsson tumbled 14 percent to a three-year low, while Alcatel sank 9.3 percent and Nokia fell 3.2 percent.

The FTSEurofirst 300 index of top European shares was down 0.8 percent at 1,036.66 points at 1209 GMT, while the euro zone's blue-chip Euro STOXX 50 index was down 1.1 percent, at 2,405.50.

Euro zone bank shares, among the biggest holders of Greek debt, dropped following a brisk rebound over the past few weeks. Societe Generale was down 4.2 percent and Credit Agricole down 2.8 percent.

Charts showed both the FTSEurofirst 300 and Euro STOXX 50 indexes, which have been steadily rising over the past five weeks, have not broken upward trendlines, signalling this week's pullback could be short-lived.

"The risk premium on equities was just too high at the end of last year," said Bill O'Neill, chief investment officer Europe, Middle East and Africa, at Merrill Lynch Wealth Management, which has $1.5 trillion under management.

"I feel that clawing back some of this high-risk premium is justified, and given the policy shifts the market is seeing as well as the resilience in the U.S. economy, investors are starting to feel a little bit more confortable," he said.

Following a five-week rally, the Euro STOXX 50's 12-month forward price-to-earnings ratio hit 8.9 this week, a level not seen in six months, albeit still well below the 10-year average of 11.8, according to Thomson Reuters Datastream.

While the price-to-earnings ratio has been recovering, the index's dividend yield is still a strong 4.4 percent, its highest level since early 2009 and compared with its 10-year average of 3.1 percent and a 1.95 percent yield on 10-year German government bonds.

Around Europe, Britain's FTSE 100 index was down 0.7 percent, Germany's DAX index down 0.6 percent, and France's CAC 40 down 0.8 percent.

With little sign of resolution to Greece's debt troubles after talks with bondholders stalled earlier this week, investors started to book profits on European stocks on Tuesday, spooked by revived fears of a chaotic default.

International Monetary Fund managing director Christine Lagarde said Greece's public sector creditors may need to participate in restructuring its national debt if a haircut negotiated with private sector bondholders was not enough to make the debt load on Greece sustainable.

The Financial Times, citing euro zone officials, reported on Wednesday the IMF has turned up the pressure on European officials to take on more of the burden of filling a widening gap in Greece's budget by pressing the ECB to take a hit on its 40 billion euros in Greek bond holdings.

"The solution could come from the ECB, which could accept a cut," said Franklin Pichard, director at Barclays France. "Last week, the ECB bought back about 2.2 billion euros of sovereign debt via its SMP programme. That is well below its ceiling of 20 billion euros."

Later in the session, the focus will turn to the outcome of the U.S. Federal Reserve's policy meeting, expected to signal an extended period of interest rates near zero. Given the recent improvement in the U.S. economy, it could remain tight-lipped over the prospect for further bond purchases.