European Stocks Extend Four-Month Low Amid Greek Concern

European stocks dropped amid growing concern Greece will be forced to leave the euro area.

German Chancellor Angela Merkel and new French President Francois Hollande said they would consider measures to spur economic growth in Greece as long as voters committed to the austerity demanded to stay in the euro.

National benchmark indexes declined in 13 of western Europe’s 18 markets. The U.K.’s FTSE fell 0.6%, Germany’s DAX dropped 0.3% and France’s CAC increased 0.3%. Greece’s ASE Index fell 1.3% to its lowest level since February 1990.

Lamprell Plc plunged 57% after the oil and gas rig engineer said it will incur a “small” loss in the first half, citing delays in equipment deliveries.

Credit Agricole climbed 2.2%, after tumbling 13% over the previous three days. Societe Generale upgraded the lender’s shares to buy from sell with a price target of 4 euros.

Italy’s Banca Carige SpA fell to its lowest since at least 1995.

Swatch Group AG gained 2.7% after the watchmaker forecast that the industry will expand at a “high single-digit” or “double-digit” pace in 2012 amid growing demand for luxury goods.

The Standard & Poor’s 500 Index dropped for a fourth day  as concern about Europe’s crisis overshadowed better-than-estimated data on housing starts and industrial production.

The S&P 500 dropped 0,4% to 1,324.83, reversing an earlier gain of as much as 0.8%.

Concern about Europe’s crisis drove the S&P 500 down 2% over the past three days. ECB President Mario Draghi acknowledged that Greece could leave the euro and signaled policy makers won’t compromise on their key principles to prevent an exit. Equities rose earlier today as economic data bolstered optimism the U.S. can withstand fallout from Europe.

Several Federal Reserve policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery going, minutes of their last meeting showed.