The FTSEurofirst 300 Index provisionally closed down 0.2 percent at 1,133.21 points as the lack of a solution to the "fiscal cliff" -- automatic spending cuts and tax increases due to begin at the start of the new year -- continued to drag on markets. President Barack Obama and Republican House Speaker John Boehner met at the White House on Thursday but there was no indication if any progress was made.
European stocks traded higher earlier in the morning session after an improvement in PMI data for the euro zone and after Fitch affirmed France's triple-A rating.
But sentiment was dampened by the fact that euro zone leaders postponed major decisions on economic integration till June next year at a summit on Thursday.
Euro zone December Composite Flash PMI came in at 47.3 against 46.5 in November. Several countries saw improvements in PMI readings. France's December Flash Composite PMI came in at 45.0 against 44.3 in November. In Germany, December Composite Flash PMI data came in at 50.5 compared to 49.2 in November.
Employment statistics for the third quarter were also released on Friday for the euro zone as a whole, and showed a drop of 0.2. Inflation showed signs of easing as the figure for November fell to 2.2 percent.
Meanwhile, ratings agency Standard and Poor's has downgraded the outlook on the U.K.'s coveted triple-A credit rating to negative. The agency joins the other two largest credit ratings agencies, Moody's and Fitch, in putting the country on "negative outlook" and said it was concerned at the lack of political will to tackle its debt, public finances and weak economic growth.