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Еuropean stocks dropped the most in three weeks amid signs U.S. lawmakers may fail to reach an agreement on budget cuts, raising the prospect the world’s largest economy could face another credit downgrade.

The U.S. deficit-cutting congressional supercommittee will probably announce that it has failed to agree on $1.2 trillion of federal budget savings, a Democratic aide said in an e-mail. The aide, who wasn’t authorized to discuss internal matters publicly and requested anonymity, said that it was highly unlikely that the talks could be salvaged. Today is the deadline for the Congressional Budget Office to receive a plan that it can analyze before the committee’s Nov. 23 target date for reaching an agreement. S&P downgraded the U.S. on Aug. 5 to AA+ from AAA.

In Spain, Mariano Rajoy won the biggest parliamentary majority in an election in almost 30 years, and told Spaniards to brace for difficult times as the nation fights to avoid being overwhelmed by the sovereign-debt crisis.

Shares also fell as Moody’s Investors Service warned that rising French bond yields increased the fiscal challenges facing the nation with “negative credit implications.” The rating company declined to comment on a report in Le Figaro newspaper that France’s AAA credit rating is at risk.

National benchmark indexes retreated in all 18 markets in western Europe. France’s CAC 40 Index and Germany’s DAX Index lost 3.4 percent. The U.K.’s FTSE 100 Index dropped 2.6 percent. Greece’s ASE Index sank 3.7 percent as the country’s new Prime Minister Lucas Papademos met European Union President Herman Van Rompuy and European Commission President Jose Barroso in Brussels today.

KBC led bank shares lower, slumping 13 percent to 9.46 euros in Brussels, as the three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, widened for a sixth day and bond yields climbed in Spain, Italy and Belgium. Commerzbank AG plunged 6.8 percent to 1.36 euros, BNP Paribas SA slid 4.3 percent to 26.85 euros and Barclays Plc dropped 5.4 percent to 157.5 pence.

Rio Tinto Group slid 5.9 percent to 3,083 pence and Total SA lost 2.9 percent to 36.02 euros, pacing gauges of mining and energy companies lower. Copper and oil fell for a third day as Japan’s exports dropped and Singapore warned its economy may grow 1 percent to 3 percent in 2012 after expanding 5 percent this year.

Carrefour SA slipped 3.2 percent after the retailer’s largest shareholders were said to consider replacing its chairman and chief executive officer.

Adidas AG declined 3.2 percent to 48.69 euros after Welt am Sonntag reported the world’s second-largest sporting-goods maker will increase prices in 2012 because of higher raw-material prices and wage costs.

Statoil ASA slid 3.1 percent to 140.90 kroner even after Norway’s national oil company agreed to sell stakes in fields to Centrica Plc for $1.6 billion. Statoil will dispose of stakes in eight fields on the Norwegian continental shelf, it said. Centrica’s shares lost 1 percent to 286.1 pence.