Debt woes push Europe shares to 7-mth closing low

                                
 * FTSEurofirst 300 index closes down 3.9 pct
                                
 * Biggest weekly fall since November 2008
                                
 * Banks, energy stocks drop on sovereign debt worries
                                
 * For up-to-the minute market news, click on [STXNEWS/EU]
By Joanne Frearson
                                
 LONDON, May 7 (Reuters) - European shares ended at a 7-month
closing low on Friday, suffering their biggest weekly fall since
November 2008, hurt by escalating fears over the euro zone debt
crisis
                                
 The pan-European FTSEurofirst 300 <.FTEU3> index of top
shares closed down 3.9 percent at 967.42 points after touching
an 8-month intraday low earlier in the session and ended the
week down 8.9 percent.
                                
 Banking stocks retreated from earlier gains to become the
biggest fallers, with BNP Paribas <BNPP.PA>, Barclays <BARC.L>
and Societe Generale <SOGN.PA> down 5.6 to 8 percent.
                                
 The STOXX Europe 600 banking index <.SX7P> is down 16
percent so far this year.
                                
 "Uncertainty about Greece is accelerating. Investors do not
want to hold onto their positions into the weekend as they do
not know what is going to happen," said Philippe Gijsels, head
of research at BNP Paribas Fortis Global Markets in Brussels.
                                
 Fears that Greece may default on its debt has reignited
worries about the health of euro zone banks. Earlier, the
Euribor bank-to-bank lending rates reached their highest level
in almost four months. [ID:nEAP000434]
                                
 A UK Treasury official told Reuters that finance ministers
from the Group of Seven rich nations' club had agreed to keep a
close eye on the ructions in financial markets caused by the
Greek debt crisis.
                                
 Meanwhile, German President Horst Koehler's office said he
had signed into law a bill authorising the country's
contribution to a multi-billion euro rescue package for Greece.
                                
 
                                
 ENERGY STOCKS DROP
                                
 Energy stocks dropped as crude <CLc1> dipped 2 percent.
BP <BP.L>, BG Group <BG.L>, Royal Dutch Shell <RDSa.L> and Total
<TOTF.PA> lost 2.3 to 3.4 percent.
                                
 Across Europe, the FTSE 100 <.FTSE> index fell 3.9 percent,
Germany's DAX <.GDAXI> lost 3.3 percent and France's CAC 40
<.FCHI> slumped 4.6 percent. Around 92 billion euros ($117
billion) was wiped off the three indexes on Friday.
                                
 Spain's IBEX <.IBEX> fell 3.3 percent, Portugal's PSI 20
<.PSI20> was down 2.9 percent and Italy's benchmark <.FTMIB>
dropped 3.3 percent.
                                
 Among other individual stocks, UK outsourcing firm Capita
<CPI.L> slipped 5.6 percent on concerns over the impact a
stalemate might have on future contracts, with Shore Capital
downgrading its rating.
                                
 Britain's opposition Conservatives said they would try to
form a government with the smaller Liberal Democrats after
winning the most seats in the closest parliamentary election in
a generation. [ID:nLDE64600H]
                                
 One of the few risers was HSBC <HSBA.L>, which managed a 0.2
percent gain after an upbeat first-quarter trading update.
[ID:nLDE64514E]
                                
 The VDAX-NEW volatility index <.V1XI>, was up 10.1 percent
at 35.38 points. The higher the volatility index, which is based
on sell- and buy-options on Frankfurt's top-30 stocks
<0#.GDAXI>, the lower is investors' appetite for risky assets
such as equities.
                                
 (Editing by Erica Billingham)