European shares decline on lingering Greek uncertainty

LONDON: European shares slipped on Tuesday, as lingering uncertainty over the outcome of Greece's negotiations with creditors weighed on the region's stock markets.

Greece's leftist government has put forward first proposals for pension reform, the European Union's economics chief said on Tuesday, as debt talks with international creditors reach a crunch point.

Greece must repay four loans totalling 1.6 billion euros ($1.8 billion) to the International Monetary Fund this month, starting with a 300 million euro payment on June 5.

Failure to reach agreement this month could trigger a Greek default and lead to the imposition of capital controls and a potential exit from the euro zone, dealing a blow to Europe's supposedly irreversible single currency.

Most investors expect Greece to remain in the euro zone, and record low interest rates and other economic stimulus measures from the European Central Bank have enabled European stock markets to rally this year, despite the Greek uncertainty.

Nevertheless, the lack of concrete progress in the Greek situation was leading some investors to cut back on European equity holdings.

Athens' benchmark ATG was down by 1 percent while Germany's DAX fell 1.2 percent, leaving the DAX some 9 percent below a record high set in early April.

"There is still no real sign of a deal yet on Greece. I would expect further weakness throughout this week on the DAX," said Hantec Markets' analyst Richard Perry.

PERNOD FALLS

The broader pan-European FTSEurofirst 300 index was down by 1 percent at 1,571.13 points. The index remained steady after data showed that euro zone inflation was higher than expected in May, with equity traders still focusing more on the Greek impasse.

French drinks group Pernod Ricard was the worst-performing stock on the FTSEurofirst, falling 4.1 percent with traders citing comments from the company that its gross margins were under pressure as weighing on the stock.

The FTSEurofirst 300 has risen 15 percent this year, mainly thanks to the ECB's stimulus programme, and Goldman Sachs strategists saw earnings growth as still supporting the European market, in spite of the Greek problems.