European shares fell on Monday as fresh political ructions in Italy added to debt-market contagion fears, hitting cyclical stocks and overshadowing a tentative deal to help push through Greece's bailout package.
The early decline follows a 3.8 percent fall last week for the FTSEurofirst 300 <.FTEU3>, ending a five-week rally, and comes ahead of a euro zone finance minister meet to flesh out plans to boost the region's bailout fund.
A critical Italian parliament vote on Tuesday to debate austerity cuts has become a test of Prime Minister Berlusconi's government, with the opposition also preparing a motion of no confidence in the leader.
The uncertainty in Rome eclipsed a political cross-party deal in Greece to approve the terms of its international bailout, although it was still short on detail.
The focus is Italy; Italy's clearly the big one. Everyone expected what has come out of Greece, Christopher Potts, strategist at Cheuvreux, said, adding the whole problem is the opposition and its disarray. Who takes over and how will it be organised? No-one has the answer but it's of huge importance.
If you get a succession organised, there's going to be a huge rally in Italian financial assets, both bonds and equities, but it's not an easy question.
Italy's blue-chip FTSE MIB <.FTMIB> was down 1.5 percent in early trade on Monday, against a 0.9 percent fall for the broader FTSEurofirst 300, while its benchmark government debt yields closed last week at a euro-era record high.
(Reporting by Simon Jessop)