Banking stocks held European shares below 4-1/2 years highs on Monday, depressed by a worsening outlook for Italy's public finances.
The STOXX euro zone banking index shed 0.8 percent, as a downgrade of Italy's sovereign debt rating late on Friday triggered a sell-off in the country's banks, which own much of Rome's public debt. Fitch reduced Italy's credit rating to triple-B positive, citing political uncertainty as the key reason for the downgrade.
In a statement, Fitch said: "The inconclusive results of the Italian parliamentary elections on February 24-25 make it unlikely that a stable new government can be formed in the next few weeks." It added that the political situation was a "non-conducive backdrop" for further structural reform measures.