European stocks, euro drop at end of downbeat week

European stock markets slid on Friday and the euro dropped against the dollar at the end of a week dominated by rising concern about the economic outlook for the United States and eurozone. Sentiment took a fresh hit in indebted eurozone member Spain as the country's biggest airline Iberia announced plans to slash 4,500 jobs to keep the company alive. London's FTSE 100 index of top companies fell 0.47 percent to 5,776.11 points in midday deals, Frankfurt's DAX 30 dropped 0.96 percent to 7,135.58 points and in Paris the CAC 40 lost 0.22 percent to 3,400.20. Madrid's IBEX 35 index shed 1.17 percent to 7,534.60 points. "European markets are soft over fears for the Greek austerity measures being pushed through and the imminent resolution of the US debt ceiling," said Alastair McCaig, market analyst at IG trading group. In foreign exchange activity, the euro fell to $1.2714 from $1.2748 late in New York on Thursday. Gold prices rose to $1,737.22 an ounce from $1,717 on Thursday as traders sought safety. Barack Obama's re-election as US president this week has stoked concerns of political gridlock in Washington with a "fiscal cliff" approaching that could tip the country back into recession. While Obama's victory over Mitt Romney removed uncertainty, traders have now turned their focus to the deep spending cuts and huge tax hikes that will come into force on January 1 if Republicans and Democrats do not reach a deal. The package is a major threat to the economy after a protracted but possibly reckless compromise was reached last year -- with the expectation a less painful plan could be agreed -- to raise the country's borrowing cap. If the automatic measures kick in, the United States' slow recovery from the financial crisis could be reversed and the nation tip back into recession, dealing a blow to the global economy. "Markets remain nervous and understandably so with the US fiscal cliff looming on the far side on the Atlantic and this side, despite what the ECB President 'super' Mario (Draghi) says, the eurozone crisis continues to rumble on," said Capital Spreads analyst Angus Campbell. Greek lawmakers on Wednesday adopted an 18.5-billion-euro ($23.6 billion) package of cuts and labour reforms as tens of thousands of angry protesters massed outside parliament, some hurling petrol bombs at police firing tear gas. The package is vital for eurozone member Greece to unlock a 31.5-billion-euro tranche of aid from its troika of international creditors -- the European Union, International Monetary Fund and European Central Bank. On the corporate front meanwhile, shares in Iberia parent group IAG gained 1.43 percent to 170.4 pence, as investors bet on a positive outlook for the company that also owns British Airways despite the troubles at its Spanish arm. Diageo shares rose by 0.57 percent to 1,799.17 pence after the British alcoholic drinks giant announced a deal for control of Indian whisky maker United Spirits to tap into India's growing number of middle class consumers. In France, Credit Agricole shares fell by 6.89 percent to 5.511 euros after the bank reported a big quarterly loss owing to exceptional items.