* FTSEurofirst 300 slips 0.1 percent
* Spain’s IBEX biggest laggard, down 2.2 percent
* Athens bourse jumps 6.9 pct after election polls
By Tricia Wright
LONDON, May 28 (Reuters) - European shares ended in negative territory on Monday, reversing earlier gains in thin trade as concerns surrounding Spain’s banks returned to the forefront of investors’ minds.
The FTSEurofirst 300 closed down 0.1 percent at 984.01, having earlier reached a high of 993.21 - boosted by opinion polls suggesting Greece’s pro-bailout parties may be able to form a government committed to staying in the euro zone.
But trade was light as a number of European markets were closed, accentuating the moves, with the FTSEurofirst 300 trading just two thirds of its 90-day daily average.
Spain’s IBEX was the biggest faller, down 2.2 percent, weighed by banking heavyweights Santander and BBVA, with sentiment dampened by the growing cost to the public purse of shoring up the country’s lenders.
A Spanish government source said the country may use sovereign debt to recapitalise struggling lender Bankia , down 13.4 percent on Monday, which last week asked for rescue funding to cover writedowns on residential mortgages.
Spanish 10-year bond yields rose to 6.53 percent, their highest since November 2011 before the European Central Bank injected cheap three-year loans into the banking system.
“Pressure on the Spanish banks is continuing to mount as remaining confidence is sucked out of the country, so investors are understandably content in sitting on their hands,” Mike McCudden, head of derivatives at Interactive Investor, said.
“With Greece now starting to look like an increasingly smaller part of the economic landscape of the euro zone, it is now down to the Euro leaders to show unity and execute a bold plan which will stop the rot.”
While the weekend polls went some way towards assuaging investor fears about a possible Greek exit from the euro zone and the drastic knock-on effects it could unleash on the region, longer-term investors chose to stick to the sidelines.
“The problem really is that even after the election there’s a huge adjustment needed in Greece so there’s still a lot of economic uncertainty irrespective of what could happen,” said Richard Batty, strategist at Standard Life Investments, which has around $250 billion of assets under management.
“I think that will just keep markets on the back foot for some time,” said Batty, with Standard Life Investments maintaining its underweight position on European equities.
Athens’ blue-chip bourse, which has slumped to levels not seen in more than 20 years, closed up nearly 7 percent.
Strategists at Societe Generale estimated an orderly Greek euro zone exit could shave 10 percent off the value of euro zone blue chips, while a disorderly one could see the Euro STOXX 50 nearly halve in value.
Goldman Sachs, looking at the broader STOXX 600 index , forecast a fall of up to 12 percent in case of a speedy, unilateral Greek euro zone departure.