Europe stocks suffer worst day since January

LONDON (Reuters) - European shares recorded their steepest daily fall since January on Friday, with investors ditching banks as fresh cracks appeared in Greece's bid to secure an international bailout and avoid a chaotic default.

After weeks of wrangling and uncertainty, a deal had looked almost in the bag on Thursday, when Greek politicians agreed on a raft austerity measures to appease their financial backers, sparking a relief rally on global markets.

But cracks appeared overnight, with euro zone finance ministers telling Athens to do more. On Friday, a far-right Greek party leader said he would not back the austerity measures which are deeply unpopular with the public.

"It's another extension in the Greek drama and confirms that the markets have priced in to some extent that we will be able to get past this. So if the probability of a chaotic default increases a bit, that weighs on the market," Valentijn van Nieuwenhuijzen, head of strategy at ING Investment Management, said.

"The first reaction is a bit of an across the board reverse trade - sell the sectors which have done well over the last six weeks."

The FTSEurofirst 300 .FTEU3 of top shares closed down 0.9 percent at 1,064.37 points, retreating from six-month highs near 1.080 hit earlier in the week. The pan-European index is down 2.9 percent for the week, its biggest fall in nearly two months.

On a national level, the Athens bourse fared the worst, down 3.2 percent .ATG on Friday. Germany's DAX .GADXI fell 1.4 percent, while the French CAC 40 .FCHI was down 1.5 percent and Britain's FTSE 100 .FTSE lost 0.7 percent.

(Reporting By Toni Vorobyova)