European shares turn lower

European stocks fell, snapping the biggest three-day rally in 16 months, after a report that some countries are demanding private creditors take bigger writedowns on Greek bonds.

The Stoxx Europe 600 Index slipped 0.2 per cent to 229.45 at 2.54pm in London after earlier rising 0.5 per cent. The gauge had surged 7 per cent over the past three days, the biggest rally since May 2010, amid speculation policy makers will increase efforts to contain the region's debt crisis.

"We're evaluating how much banks must take in additional provisions," said Pierre Mouton, a fund manager at Notz Stucki and Cie. in Geneva, who helps oversee $7.5 billion. "The market would be able to forget all of this if the problem stops at Greece. What is stopping the market from rebounding is concern about Italy."

National benchmark indexes fell in nine of the 18 western European markets. Germany's DAX Index added 0.5 per cent and France's CAC 40 Index rose 0.1 per cent. The UK's FTSE 100 Index retreated 0.6 per cent.

The Irish index of shares was marginally lower, falling 0.4 per cent to 2509.86.

German chancellor Angela Merkel said today that she's waiting for a report from the European Union, European Central Bank and International Monetary Fund on Greece's budget progress before deciding whether revisions are needed to the financing package agreed in July.

Equity markets have rallied over the past few sessions on expectations that European officials will aggressively tackle the debt crisis in its peripheral economies, notably Greece, by boosting the euro zone's €440 billion rescue fund (EFSF).

Many analysts have stressed markets may be expecting too much for policymakers to come up with a definitive plan in the next few weeks, and indeed it is hard to find traders in Europe who actually subscribe to such a view.

An increase in the EFSF faces opposition in Germany and there are signs of a split within the currency region over the terms of Greece's next bailout.

Greek banks rallied today. National Bank of Greece SA jumped 5.6 per cent to €2.84. Alpha Bank SA surged 12 per cent to €1.41 and Piraeus Bank SA soared 6.5 per cent to 49 cent.

The EU proposed a financial-transactions tax that would take effect in 2014 and raise about €57 billion a year. The plan would set minimum tax rates for financial transactions throughout the 27-country region, the European Commission said.

Agencies