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European stocks declined as Italy’s premier in waiting Mario Monti struggled to get political parties to help form his new Cabinet and the country’s biggest defense company forecast an unexpected loss. Monti, a former European Union competition commissioner, struggled to get political parties to agree to participate in his so-called technical Cabinet during talks in Rome yesterday and today. A government lacking political representation will find it harder to muster support from the parties in parliament to pass unpopular laws.

The euro area’s inability to contain its sovereign-debt crisis has led to a surge in Italian borrowing costs with yields on the country’s benchmark 10-year bonds climbing above 7 percent today. Monti will try to reassure investors that Italy can cut its 1.9 trillion-euro debt and spur economic growth that has lagged behind the euro-region average for more than a decade.

A report today showed German investor confidence fell to a three-year low in November. The ZEW Center for European Economic Research in Mannheim, Germany, said its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 55.2 from minus 48.3 in October. That’s the lowest since October 2008.

A separate report showed the euro area’s economic expansion failed to accelerate in the third quarter. Gross domestic product increased 0.2 percent from the previous three months, when it rose at the same pace, the European Union’s statistics office in Luxembourg said.

European stocks pared their losses after a U.S. Commerce Department report showed that retail sales climbed more in October than predicted as Americans bought iPhones and cars. A separate report showed manufacturing in the New York region unexpectedly expanded in November. The Federal Reserve Bank of New York’s general economic index rose to 0.6 from minus 8.5 in October.

National benchmark indexes fell in 14 of the 18 western- European markets today. France’s CAC 40 Index lost 1.9 percent, the U.K.’s FTSE 100 Index slipped less than 0.1 percent and Germany’s DAX Index dropped 0.9 percent.

Finmeccanica slumped 20 percent to 3.57 euros, its lowest price in 15 years. The company forecast an adjusted loss before interest, taxes, amortization and restructuring of 200 million euros. The maker of helicopters and plane parts booked writedowns of 753 million euros.

Europe’s banking shares slid 2 percent as a group, extending yesterday’s drop. National Bank of Greece SA retreated 12 percent to 1.86 euros and Alpha Bank SA plummeted 11 percent to 96 euro cents. UniCredit, Italy’s biggest bank, lost 4.5 percent to 73.95 euro cents.

Vienna Insurance Group AG sank 4.5 percent to 26.74 euros. The insurer said third-quarter net income rose 3.9 percent to 98.2 million euros. That missed the average estimate of 102.8 million euros in a Bloomberg survey of six analysts. The insurer wrote down its Italian government bonds by 10 percent.

Cable & Wireless Worldwide plunged 26 percent to 22.31 pence, its largest drop since March 2010 and the biggest retreat on the Stoxx 600. The company, which provides telecommunications services to the U.K. police force, will pay an interim dividend of 0.75 pence per share in January 2012 and then suspend future dividend payments to “improve balance-sheet strength and to enable investment in the business,” it said.

Electrolux AB lost 6.3 percent to 113.40 kronor as the world’s second-biggest appliance maker said it will close factories in Europe and North America to cut costs amid weak demand.

Kabel Deutschland AG slipped 3.2 percent to 40.79 euros as Germany’s largest cable operator predicted sales growth in 2011 at the lower end of its forecast range of 6.25 percent to 6.75 percent.