Stocks and the euro fell while safe-haven government bonds rose on Friday as final approval of a long-awaited Greek debt deal remained elusive, keeping alive the threat of a messy default.

Euro zone finance ministers gave a lukewarm response to an inter-party agreement from Athens on more austerity, and set more conditions for Greece to secure a second bailout needed to ensure it can meet debt repayments next month.

That tempered some of the enthusiasm in financial markets seen on Thursday after Greek political leaders clinched the austerity deal after weeks of wrangling.

Despite yesterday's agreement between party leaders over the austerity measures, traders still remain skeptical over whether they (Greece) can avoid a default, said Jonathan Sudaria, dealer at Capital Spreads.

Concerns were raised that Greece still hasn't done enough to satisfy the criteria to receive a bailout.

The FTSEurofirst 300 <.FTEU3> index of top European shares was down 0.6 percent at 1,066.73 points. The STOXX Europe 600 euro zone Banking Index <.SX7E>, exposed to the euro zone's sovereign debt crisis, fell 1.9 percent.

The euro was off a two-month high of $1.3322 reached on Thursday, trading down 0.2 percent at $1.3250.

Growth-linked currencies like the Australian dollar and commodities like copper and oil eased as investors cut exposure to risk and preferred the safety of U.S. Treasuries and German Bunds.

Risk appetite was also crimped after China's trade activity fell in January the most since the depths of the financial crisis, raising concerns about the resilience of domestic demand that has shielded the world's second largest economy from slackening exports.

(additional reporting by Atul Prakash; Editing by John Stonestreet)