* FTSEurofirst 300 closes 1.8 pct lower
* Index falls 9.7 pct in February
* Drugmakers fall on U.S. budget worry
* Lloyds leads British banks lower
By Brian Gorman
LONDON, Feb 27 (Reuters) - European shares fell on Friday as
the U.S. government struck a deal to take a sizeable stake in
Citigroup <C.N>, the U.S. budget plans raised worries over
drugmaker earnings and a big loss at Lloyds hit British banks.
The FTSEurofirst 300 <> index of top European shares
fell 1.8 percent to 719.4 points.
Over the week, the index slipped 2.2 percent, and it fell
9.7 percent in the month of February, on continued worries over
the global slowdown and the crisis in the banking system.
"Citigroup was the main thing today," said Howard Wheeldon,
strategist at BGC Partners in London. "Even though everybody
knew it's been coming for a while."
"It's a creeping step towards full nationalisation," he
said.
The U.S. government will boost its stake in Citigroup Inc
<C.N> to as much as 36 percent, bolstering the banking giant's
capital base in one of the most dramatic efforts yet to prop up
the ailing banking industry.
Citigroup reported a full-year loss of $27.7 billion. Its
shares fell more than 30 percent.
The STOXX 600 <>, a broader index of European shares,
fell 1.8 percent, with banks taking the most points off the
index.
UK banks were worst hit, led by Lloyds Banking Group
<LLOY.L>, which closed 22.3 percent lower after it unveiled a
big loss for 2008 and said it had not yet finalised details of
its plan to put billions of pounds of assets into a UK
government-backed insurance scheme.
Barclays <BARC.L> tumbled 17.4 percent, HSBC <HSBA.L> fell
6.8 percent, ahead of results on Monday.
Royal Bank of Scotland <RBS.L> fell 20 percent, giving back
most its gains from the previous session, when it said it was
putting some of its assets into state insurance scheme.
BNP Paribas <BNPP.PA>, Societe Generale <SOGN.PA> and UBS
<UBSN.VX> fell between 4.4 and 5.8 percent.
Providing further evidence of economic slowdown, the U.S.
government reported that the economy shrank more than thought in
the fourth quarter of 2008.
The Commerce Department said the country's gross domestic
product (GDP), which measures the total output of goods and
services, fell at an annual rate of 6.2 percent in the quarter
to December, the deepest slide since the first quarter of 1982.
Last month, the government estimated that fourth-quarter GDP
shrank 3.8 percent.
PHARMAS FALL
Pharmaceutical stocks, usually deemed defensive, were big
losers, falling on U.S. budget proposals to curb costs.
AstraZeneca <AZN.L>, Sanofi-Aventis <SASY.PA> and Novartis
fell between 3.9 and 6.5 percent.
BAE Systems <BAES.L> fell 2.2 percent on concerns that
defence proposals in the U.S. budget would hit its prospects.
"People have been hiding in these sectors and are now
viewing the labyrinthine proposals in the U.S. budget with a
sceptical rather than an approving eye," said John Haynes,
strategist at Rensburg Sheppard Investment Management.
"But they will ultimately come back into the sector as there
are not too many secure places to go."
Around Europe, UK's FTSE 100 index <>, Germany's DAX
index <> and France's CAC 40 <> closed between 1.5
percent and 2.5 percent lower.
Wall Street was lower around the time European bourses were
closing.
The Dow Jones <>, S&P 500 <.SPX> and Nasdaq Composite
<> were down between 0.7 percent and 1.3 percent.
"Each day that goes by, the belief that government actions
(such as stimulus packages) will work gets less and less," said
Wheeldon of BGC Partners.
(Additional reporting by Sitaraman Shankar; editing by Karen
Foster)
