Eurostoxx 50: 2,254.00 (–34.32) Frankfurt DAX: 5,933.14 (–51.88) Paris CAC: 3,049.13 (–59.82)EUROPEAN STOCKS declined yesterday, as Italy's premier Mario Monti struggled to get political parties to help form his new cabinet and the country's biggest defence company forecast an unexpected loss.

The benchmark Stoxx 600 fell 0.4 per cent in London.

“There is still a lot of tail risk in Europe,” Peter Garnry, an equity strategist at Saxo Bank, said. “We want to be in a more hedged position going forward. In Europe and Asia, we would definitely take the position of being neutral. We’ve shifted towards consumer staples and health care.”

Europe’s banking shares slid 2 per cent as a group, extending Monday’s drop.

National Bank of Greece retreated 12 per cent to €1.86 and Alpha Bank plummeted 11 per cent to 96 cent. UniCredit, Italy’s biggest bank, lost 4.5 per cent to 73.95 cent.

Vienna Insurance sank 4.2 per cent to €26.84. The insurer said third-quarter net income rose 3.9 per cent to €98.2 million.

Mr Monti, a former European Union competition commissioner, struggled to get political parties to agree to participate in his so-called technical cabinet during talks in Rome on Monday and yesterday.

“I think the government has been born and I think we will get the names tonight or maybe tomorrow morning,” Altero Matteoli, outgoing transport minister, said.

The euro area’s inability to contain its sovereign-debt crisis has led to a surge in Italian borrowing costs with yields on the country’s benchmark 10-year bonds climbing above 7 per cent yesterday.

Finmeccanica fell 20 per cent to €3.57, its lowest price in 15 years. The firm forecast an adjusted loss before interest, taxes, amortisation and restructuring of €200 million.

Cable & Wireless Worldwide plunged 23 per cent to 23.21p, its largest drop since March 2010.

Electrolux lost 6.3 per cent to 113.40 kronor as the appliance maker said it will close factories in Europe and North America to cut costs amid weak demand.

Kabel Deutschland slid 3.2 per cent to €40.82 as Germany’s largest cable operator predicted sales growth in 2011 at the lower end of its forecast range of 6.25 per cent to 6.75 per cent. – (Bloomberg)