Europe close: US leaders scramble to meet budget deadline

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European equities had mostly dropped by close of the last day of the year as the US made its final bid to save the country from driving off the 'fiscal cliff'.

Leaders will convene in Washington at 11:00 local time Monday in a last-ditch effort to reach a budget deal to avoid more than $600bn in spending cuts and tax hikes due to kick off Tuesday.

With just hours to go before the end-of-year deadline, the US is no closer to an agreement.

Democratic Senate leader Harry Reid said late Sunday there was "still significant distance between the two sides".

President Barack Obama said if nothing is produced by deadline, he will press Reid to call on a White House plan.

Eurozone faces difficult 2013

German Chancellor Angela Merkel has warned Europe faces a tough 2013.

In excerpts of her New Year's speech to the nation, Merkel said the financial crisis is far from over despite the progress already made of reforms.

"The reforms that we've agreed on are starting to take effect. Nevertheless, we still need a lot of patience. The crisis is far from over," she explained.

All eyes on French President

French President Francois Hollande has been under pressure to fulfil his promise to cut the country's deficit to 3% of gross domestic product next year from a predicted 4.5 % this year.

The Constitutional Court threw out his 75% millionaire tax proposal, saying that it went against to the rule of equal tax treatment.

"For investors and entrepreneurs, it shows that France can't be confiscatory, that there are rules that have to be followed," Laurent Dubois, a professor at the Institute of Political Studies in Paris, told Bloomberg.

Spain's Iberdrola (Other OTC: IBDRY - news) declines

Spain's largest utility Iberdrola fell 1.14% to €4.15 after Bolivian President Evo Morales ordered the nationalisation of four of its business units.

A gauge of banks fell including HSBC (LSE: HSBA.L - news) which dropped 0.71% to 646.70p and Banco Sabadell which declined 2.83% to €1.96.

Afferro Mining (Other OTC: AFRIF - news) shares soared 11.45% to 101.50p after the company confirmed it had been approached by International Mining and Infrastructure Corporation (IMIC).

Bankia bounced back with a rise of 5% to €42.4 after the lender fell to an all-time low of 41% in the two days through December 28th when Spain gave it a negative value of €4.15bn.

Euro drops against dollar

The euro fell 0.19% to the 0.9951 dollar on Monday.

Front month Brent crude futures had declined 0.866% to $106.670 on the ICE.

RD