European shares suffered steep falls on Monday as mounting political uncertainty in the peripheral euro zone prompted investors to lock in profits on indexes trading close to multi-year highs.
The pan-European FTSEurofirst 300 Index provisionally ended down 1.4 percent at 1,151.73 points, its lowest close since Dec. 31, having hit a near two-year peak of 1,178.55 points towards the end of January in a rally that saw it rise nearly 8 percent from a November trough.
A corruption scandal in Spain and polls showing Italy's former prime minister Silvio Berlusconi regaining ground ahead of elections this month triggered fresh concern over the potential hit to euro zone stability and growth.
That pushed peripheral bond yields higher and prompted some heavy profit taking on , down 4.8 percent, Spain's IBEX, off 3.9 percent, and Italy's FTSE MIB, down 4.5 percent.
Yves Maillot, head of European equities at Natixis Asset Management, which has 286.5 billion euros ($392.4 billion) of assets under management, said the fall should be viewed as a pause rather than the start of a serious sell-off, and was therefore a buying opportunity.
"For many weeks now we've had very positive performances so that's the reason why we maybe need a correction in the very short term," he said.
Eurostat data showed prices at factory gates in the euro zone countries fell 0.2 percent in December from November, which was in line with expectations by economists in a Reuters poll.
Elsewhere, Spain's Prime Minister Mariano Rajoy and German Chancellor Angela Merkel met on Monday ahead of this week's EU Summit. Rajoy promised his country last week that he would introduce stimulus measures to try to alleviate record unemployment.
On Sunday, Rajoy said that his finances would be made more transparent to calm a growing scandal in the country. Alleged secret payments to Rajoy and other leading members of his party have been reported in recent weeks, and Rajoy is promising to disclose his tax returns and financial assets this week.
In the U.K., finance minister George Osborneset out new laws to break up misbehaving banks. Those banks that fail to ringfence their retail banking operations from their investment banking activities could in the future face being dismantled.
Antonio Horta-Osorio, the chief executive of Lloyds Banking Group, will appear in front of U.K. policy makers on Monday. Horta-Osorio is set to be grilled over whether he should keep his potential 2.5 million pound ($3.9 million) bonus after news that his counterpart at Barclays, Antony Jenkins, decided to waive his on Friday.
The leadership conflict at the London-listed miner Bumi continued on Monday. Nat Rothschild was called upon to return bonus shares that were granted to him after the company was initially created. Meanwhile, Rothschild released a statement via NR Investments to the Shareholders of Bumi setting out why he believes the current board has failed and a new board should be elected in its place. Shares in the firm were higher by 0.7 percent.
Spanish employment data were released by the country's labor ministry on Monday. The number of people out of work rose by 2.7 percent in January compared to December's figures.