The pan-European FTSEurofirst 300 Index unofficially closed 0.3 percent lower at 1,184.53 points, after Italy's main leadership candidate, Pier Luigi's Bersani, reportedly said that only an "insane person" would want to govern the country. He added that Italy is "in a mess" and faces a difficult year.
Bersani made the remark after the anti-establishment "Five Star Movement" party, headed by comedian Beppe Grillo, refused to form a coalition government, thwarting Bersani's latest attempts to form a governing alliance.
A political stalemate since its inconclusive elections in February has spiked concerns over how Italy will handle its growing debt problems. This was demonstrated by Italy's bond auction on Wednesday, at which five-year borrowing costs reached their highest since October.
(Read More: Hey Euro Zone, You Overrate Yourself: Moody's)
Elsewhere in Europe, Cyprus is finalizing financial control measures to prevent a run on its banks, which have been shut for over a week since the country agreed to a conditional 10 billion euro ($12.8 billion) bailout from international lenders. Cypriots have been lining up to withdraw cash from ATMs, with limits of 100 euros per day for some banks.
"Banks will open on Thursday. We will look at the best way to limit the possibility of large sums of money leaving, and not imposing punitive conditions on the economy, businesses and individuals," Cypriot Finance Minister Michael Sarris said in a television interview.
Large deposit holders at the country's second biggest lender, the Cyprus Popular Bank, could face losses of as much as 80 percent on their deposits, Sarris said in the interview.