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European shares fell on Friday, and are on track to end the week lower, after euro zone leaders imposed further conditions on Greece to receive its next rescue package and the country's far-right leader said he could not vote in favor of the bailout deal.
Confidence among investors sagged because if an agreement is not reached on the reforms needed for Greece to receive the new bailout a messy default could occur which could have a ramifications across markets.
"Europe is causing confusion in the market and the investor confidence that a deal was going to be agreed on Greece has eased," said Bob Parker, senior adviser at Credit Suisse.
"If there is no Greek deal then there could be chaotic default and the write downs that banks and investors would have to take would increase."
Parker thought investors would remain nervous for the first quarter as peripheral euro zone countries and banks refinance, but he said the second half could see gains of 5-8 percent if corporate results improved and central banks provided support.
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Banks, many of them exposed to euro zone sovereign debt, put in a mixed performance.
Commerzbank (CBKG.DE), one of the banks with a large amount of the region's debt, fell 3.5 percent to feature on the worst performers' list on the Greek uncertainty.
The German bank was also in "overbought" territory after gaining 14.8 percent in the past three days as sentiment towards Greece improved early in the week and following strong results from its Polish unit BRE Bank BREP.WA.
Its relative strength index was at 70.9. A score of 70 and above is considered overbought by technical analysts.
Barclays (BARC.L), in contrast, was among the top climbers, up 4 percent, recovering from initial falls as a robust performance from the British bank's retail and corporate division offset weak figures in investment banking.
Other results were a reminder of the impact that harsh austerity measures were having on companies.
Galp Energia (GALP.LS) fell 2.7 percent after it said it expected Portugal's recession and austerity drive to continue to weigh on oil product sales.
By 1245 GMT, the pan-European FTSEurofirst 300 .FTEU3 index of top shares was down 0.9 percent at 1,064.08 points after being as high as 1,073.49.
It is on track to end the week 0.9 percent lower, halting the sharp gains made in the previous week.
