European stocks declined for a third day amid concern that the impasse over the U.S. budget and debt limit may lead to a default.

The Stoxx Europe 600 Index slipped 0.7 percent to 304.85 at 4:30 p.m. in London. The benchmark has fallen 1.6 percent this week after U.S. House Speaker John Boehner said he will attach conditions before backing a bill to raise the federal borrowing limit and as the first shutdown of the federal government in 17 years continues.

President Barack Obama said yesterday that the U.S. economy risks a “very deep recession” if Congress doesn’t raise the debt ceiling. He spoke after calling Boehner to “reiterate that he won’t negotiate on a government-funding bill or debt-limit increase,” said Brendan Buck, a Boehner spokesman.

Tentative Steps

Still, lawmakers began taking the first tentative steps toward a path to raising the limit even as the rhetoric grew more divisive. Senate Democrats plan a test vote before the end of this week on a measure that would grant Obama authority to raise the ceiling, probably for a year, unless two-thirds of both chambers of Congress oppose.

The Treasury has said that it will exhaust measures to avoid exceeding the borrowing limit on Oct. 17. If that happens, the government will run out of cash to pay all of its bills at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

Obama will nominate Janet Yellen as chairman of the Federal Reserve, which would put the world’s most powerful central bank in the hands of a key architect of its unprecedented stimulus program and the first female leader in its 100-year history.

Obama will announce the nomination at 3 p.m. today in Washington, a White House official said in an e-mailed statement. Yellen, 67, would succeed Ben S. Bernanke, whose term expires on Jan. 31.

National benchmark indexes retreated in 13 of the 18 western European markets.

FTSE 100 6,337.91 -27.92 -0.44% CAC 40 4,127.05 -6.48 -0.16% DAX 8,516.69 -39.20 -0.46%

Alcatel-Lucent slid 7.5 percent to 2.56 euros. Ayrault said he wanted negotiations to limit job cuts. “If there is no accord, this restructuring won’t be approved,” he said on Europe1 radio.

Alcatel said on Oct. 8 that it will eliminate 10,000 jobs as Chief Executive Officer Michel Combes accelerates a 1 billion-euro ($1.4 billion) cost-cut plan to revive the unprofitable company.

Saint-Gobain (SGO) dropped 4.2 percent to 36.65 euros. Morgan Stanley cut its rating on the stock to underweight, similar to a sell recommendation, from equal weight, saying it doesn’t see a recovery yet in the European building industry and the contribution from emerging markets will slow.

Vedanta Resources Plc (VED) slid 5 percent to 1,017 pence, its lowest price in three months. The India-focused metals and oil producer said fiscal second-quarter copper output in Zambia declined 26 percent and iron-ore mining in Karnataka state remains halted.

Celesio AG dropped 3 percent to 19.88 euros. Commerzbank AG downgraded the drug wholesaler to hold from buy, citing the risk that its majority shareholder, Franz Haniel & Cie GmbH, may not allow McKesson Corp. to gain control of the business. Celesio jumped 20 percent yesterday as Dow Jones reported that McKesson has started talks with Franz Haniel about acquiring the company.

Wimpey advanced 5.1 percent to 103.7 pence. Goldman added the U.K.’s second-largest homebuilder by volume to its conviction buy list, citing its exposure to the domestic housing-market recovery.