* FTSEurofirst 300 down 0.7 percent
* Automakers, financials feature among top decliners
* Volatility index jumps 11 percent; risk appetite falls
By Atul Prakash
LONDON, Nov 29 (Reuters) - European shares fell on Monday after an 85 billion-euro bailout deal for Ireland failed to allay concerns that the eurozone debt crisis could spread to other countries.
An 11 percent jump in the European volatility index to three-month highs signalled a drop in appetite for risky assets, while charts indicated that a close below last week's low could be a matter of worry for the market.
By 1243 GMT the FTSEurofirst 300 index of top European shares was down 0.7 percent at 1,078.96 points in choppy trade, having hit a one-week high at 1,096.38 points earlier in the session and then slipping to a low of 1,077.00.
Automakers topped the losers' list on worries that a slow economic recovery could hurt demand. Daimler AG, Porsche and Renault fell 2.2 to 2.3 percent.
The main focus stayed on the euro zone debt problems. Shares opened higher after European Union finance ministers backed the loan package to help Ireland bridge its budget deficit, but the euphoria soon dissipated.
"The worry is that Ireland won't mark the end of the euro zone crisis and with the economies of Portugal and Spain looking less than robust, markets are worried that we could be talking about potential bailouts once again in the not too distant future," said Ben Critchley, sales trader at IG Index.
The cost of insuring Portuguese and Spanish debt against default rose to a record high after a tepid Italian auction result, while Portugal's economic climate indicator fell for the second straight month in November.
"The issue has not been resolved," said Luc Van Hecka, chief economist at KBC Securities. "We can perhaps sedate the problem regularly for some time, but it will pop up again until there is some kind of final agreement which almost inevitably leads to some kind of fiscal authority for the euro zone.
Financial shares slipped, with the STOXX Europe 600 banking index falling 0.9 percent. BNP Paribas, Bankinter and Societe Generale fell 2.4 to 3 percent. But Bank of Ireland jumped 21.5 percent, while Allied Irish Banks was up 9.7 percent.
RISK APPETITE DOWN
The VDAX-NEW volatility index, one of Europe's main barometers of investor anxiety, jumped 11 percent to its highest since early September. The higher the volatility index, based on sell- and buy-options on Frankfurt's top-30 stocks, the higher investors' aversion for risky assets such as stocks.
Technical analysts said investors should keep an eye on key levels. Charts showed the FTSEurofirst 300 fell just 1.4 percent last week despite the Irish debt crisis.
"The magnitude of the break is not sufficient at this stage to call an end to the rally. However, a close below last week's low, at 1,076, would be a cause for concern," said Bill McNamara, technical analyst at Charles Stanley.
The Thomson Reuters Peripheral Eurozone Countries Index fell 2 percent. Ireland's ISEQ rose 0.7 percent, but Britain's FTSE 100, Germany's DAX, France's CAC 40, Spain's IBEX, Portugal's PSI 20, Italy's FTSE MIB fell 1.1 to 1.6 percent.
BP was down 1.2 percent, tracking the wider market weakness. The oil major has agreed to sell its stake in Argentina-based Pan American Energy to Bridas Corp, half owned by China's CNOOC . (Editing by Greg Mahlich)