European stocks fell on Monday in choppy trading driven by political turmoil in debt-laden Italy, where bond yields hit euro era highs, though equities pared losses on hopes Prime Minister Silvio Berlusconi was about to resign.

Berlusconi defied huge pressure to resign, as political instability in the euro zone's third-biggest economy prompted investors to flee riskier assets.

The FTSEurofirst 300 <.FTEU3> index of top European shares fell 0.6 percent to a provisional close of 974.03 points, having been down almost 2 percent in early trade.

But Italy's benchmark <.FTMIB> outperformed, up 1.3 percent, clawing back some of Friday's heavy losses. Heavyweight Intesa SanPaolo rose 2.8 percent, ahead of results on Tuesday, and after falling 4.8 percent on Friday.

Berlusconi has a terrible track record on reform. Markets are hoping whoever (would replace) him can only be better. Forecasting economics and markets is hard enough but forecasting political newsflow is nigh on impossible, Daniel McCormack, equity strategist at Macquarie, said.

(Reporting by Brian Gorman)