Eurostoxx 50: 2,854.79 (-6.02) Frankfurt Dax: 6,780.97 (-35.15) Paris CAC: 3,892.71 (-11.74)EUROPEAN STOCKS retreated for the first time in four days as Irish and Greek bonds sank amid concern European Union leaders will struggle to solve the region's debt crisis. Banco Espirito Santo SA led a selloff in

Portuguese banks fell more than 2.5 per cent. Parmalat SpA sank the most since 2008 amid speculation that Groupe Lactalis’s purchase of a 15 per cent stake reduces the chance of rival bids. Metro AG dropped 4.7 percent after the retailer said the outlook for economic growth may be curbed, posing a risk to forecasts.

Irish, Greek and Portuguese two-year notes fell yesterday and the cost of debt insurance surged. EU finance chiefs settled late yesterday on a permanent rescue fund to lend €500 billion as of 2013, while remaining divided over how to get the stopgap fund to its full capacity. Government controlled Allied Irish Banks responded to market speculation by saying it has “no plans” to miss interest payments on its bonds. National benchmark indexes fell in 15 of the 18 western European markets.

Portugal’s PSI-20 tumbled 1.5 per cent amid speculation the government may collapse today as parliament votes on budget cuts that have divided lawmakers. “The likelihood that the Portuguese government will fall this week looks high,” JPMorgan Chase economist Nicola Mai wrote in a report.

Espirito Santo, Portugal’s biggest publicly traded bank, dropped 2.6 per cent to €3.14. Banco Comercial Portugues SA, the second-largest, slid 2.5 per cent to 63.4 cent. Banco BPI SA lost 2.4 per cent to €1.33.

Parmalat dropped 7.1 per cent to €2.29. Lactalis said it will buy out a group of shareholders, removing activist investors from a battle for control of Italy’s biggest dairy company. The French company agreed to acquire 15.3 per cent of Parmalat owned by Mackenzie Financial, Skagen AS and Zenit Asset Management AB, boosting its stake to 29 per cent.

Metro lost 4.7 per cent to €47.74, the biggest decline since May. Germany’s largest retailer said political turmoil in the Middle East and Japan’s earthquake posed risks to economic growth, on which the companys forecasts depend.

Debt crises confronting EU countries are also weighing on the outlook. – (Bloomberg)