Eurostoxx 50: 2,985.02 (+35.89) Frankfurt DAX: 7,185.17 (+54.67) Paris CAC: 4,070.38 (+60.74)EUROPEAN STOCKS posted the biggest weekly retreat in seven months yesterday, led by declines in airlines and automakers, as Libya's violent uprising boosted tension in North Africa and the Middle East and sent oil soaring.

The benchmark Stoxx Europe 600 Index slumped 2.4 per cent this week, the biggest drop since July, as protests against Libyan leader Muammar Gadafy threatened to escalate into civil war.

“Investors were pretty scared,” said Arnaud Scarpaci, a fund manager at Agilis Gestion in Paris, which oversees about $110 million.

“This was the first alert to say that 2011 isn’t going to be a smooth, tranquil river for stocks. The most difficult thing now isn’t to oust Gadafy, but to put in place a democracy,” he said.

Oil had the biggest weekly gain in two years on concern the turmoil that has cut Libya’s output may spread to other parts of the Middle East.

Air France and Lufthansa lost 4.8 per cent and 6.2 per cent, respectively.

International Consolidated Airlines Group, the parent company of British Airways, slumped 8.9 per cent.

Eni, the international oil company with the largest presence in Libya, slid 4.4 per cent and OMV, central Europe’s biggest oil company, lost 8.1 per cent.

Daimler, the world’s biggest makers of luxury cars, slumped 3.1 per cent and 3 per cent, respectively.

Volkswagen trimmed most of its losses after saying profit surgedseven fold last year on demand in China and forecast growth will accelerate this year. VW preferred shares closed the week 0.2 per cent lower.

Porsche preferred stock sank 14 per cent, the largest weekly decline since May.

National Bank of Greece, the nation’s largest lender, retreated 9 per cent, and EFG Eurobank Ergasias, the second- biggest, lost 11 per cent. Greece may be unable to sustain efforts to tackle its debt, forcing a restructuring of bond payments, European Bank for Reconstruction and Development President Thomas Mirow said in an interview with Sueddeutsche Zeitung.

Alpha Bank gained 2.1 per cent after Greece’s bank rejected an unsolicited €2.8 billion ($3.9 billion) takeover bid from National Bank of Greece. – (Bloomberg)