European shares fell on Monday as euphoria over a European Union deal on deeper economic integration faded, weighed by concerns over politicians' response to the debt crisis in the short-term and the likely impact of austerity measures on growth.

At 8:11 a.m. the FTSEurofirst 300 index of top European shares was down 0.7 percent at 979.84 points, after rising 1.3 percent on Friday as the EU states decided to pursue stricter budget rules and provide up to 200 billion euros (171 billion pounds) in bilateral loans to the International Monetary Fund to help tackle the debt crisis.

A first step has been made, but the road is still long and winding. The austerity measures will have a profoundly negative impact on economic growth and will make 2012 a very challenging year in economic terms, said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

Profit growth for companies will be difficult to achieve and earnings estimates are probably still way too optimistic with a lot of room for disappointments and downgrades.

Banks, many of which have a significant exposure to debt-laden peripheral euro zone economies, were the top decliner, with the sector index down 1.4 percent and Societe Generale down 3.1 percent.

(Reporting by Atul Prakash and Simon Jessop)