European Shares Flat, ‘Fiscal Cliff’ Talks Stall

European Union flags in front of European Commission headquarter in Brussels, Belgium.
Rachele Rossi | Flickr | Getty Images
European Union flags in front of European Commission headquarter in Brussels, Belgium.

European shares were flat on Friday as discussions over the U.S. "fiscal cliff" appeared to have stalled.

The FTSEurofirst 300 Index was flat after three days of gains on European equity markets. In the U.S. the Obama administration and the Republican-controlled House of Representatives reached a deadlock over how to prevent the country going over the so-called "fiscal cliff," $600 billion worth of sharp federal spending cuts and tax increases, in January 2013.

(Read More: What is the "Fiscal Cliff")

Following talks between Treasury Secretary Timothy Geithner and Congressional leaders on Thursday, there has been "no substantive progress" in negotiations, according to House Speaker John Boehner. Earlier in the week Boehner had appeared confident a deal would be reached before Christmas.

In the euro zone on Friday, Germany's parliament is expected to approve a fresh bailout for Greece. Finance Minister Wolfgang Schaeuble, who will deliver the government's statement on the bailout, told German network ARD TV that he was confident the package would pass comfortably.

In stocks news, most of the main movers across European markets were affected by downgrades by investment banks. Credit Suisse raised its rating on Johnson Matthey to outperform. The chemicals company was one of highest gainers on the U.K.'s FTSE 100 Index.

Goldman Sachs upgraded luxury retailer to a buy; shares rose by 2.18 percent.

Andritz was on the receiving end of a downgrade by HSBC to underweight; shares fell by 1.86 percent.

Spanish banks also came under pressure again on Friday. Shares in Bankia and Banco Popular were both down after the bank were told earlier in the week that they must shrink their balance sheets.