European shares closed lower though in thin year-end trade.

They declined after the European Central Bank forecast more bank writedowns in the region.

The ECB said banks in the euro zone may still have around 187 billion euros of worthless loans on their books.

The central bank warned particularly of exposure to commercial property markets and to eastern Europe.

Oil prices were volatile after an Iraqi official said Iranian troops had crossed into Iraq and taken up positions around a oilfield which is the subject of disputed ownership between the two countries.

The euro stabilised after this week’s steep losses against the dollar and yen.

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