* FTSEurofirst 300 down 0.6 pct after hitting 3-week low
* Korean shelling, Irish uncertainty add to market jitters
* Banks among biggest losers; Bank of Ireland slumps 23 pct
By Brian Gorman
LONDON, Nov 23 (Reuters) - European shares hit a three-week low on Tuesday as investors worried about economic and political uncertainty in Ireland, and the possible effect on other euro zone countries, and North Korea's shelling of South Korea.
At 1200 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 1,086.80 points, falling for a third straight session and having fallen as far as 1,082.09, its lowest since October 29.
Banks were among the heaviest casualties, extending declines from the previous session. Bank of Ireland tumbled 23.1 percent to a low for 2010.
"There's a lack of clarity on the Irish situation. We have a headline figure of what is available (up to 90 billion euros in aid), but we don't know how it will be distributed to banks and whether it is sufficient," Mark Bon, fund manager at Canada Life in London, said.
"Although there's been a bit of tension between the two countries (North and South Korea), it's never quite escalated like this. It all adds to the nervousness."
North Korea on Tuesday fired dozens of artillery shells at a South Korean island, killing two soldiers and setting houses ablaze, in one of the heaviest attacks on its neighbour since the Korean War ended in 1953.
"Given the current macro background, an escalation in tension in Korea is the last thing the market needs," a London-based trader said.
KNIFE-EDGE
Ireland's government was on a knife-edge on Tuesday with damaged Prime Minister Brian Cowen challenging the opposition to let an austerity budget pass and trigger an EU/IMF bailout before early elections.
Heavyweight Spanish banks Banco Santander and BBVA fell 3.2 and 2.9 percent respectively.
Yields jumped on Spain's issue of short-term Treasury bills compared with a tender a month ago, reflecting the impact of Ireland's debt crisis on other countries in the euro zone periphery that are seen most at risk.
Spain's Treasury sold 3.26 billion euros ($4.48 billion) of three- and six-month bills on Tuesday, near the bottom of its 3 billion to 4 billion euros target range.
Other banks on the slide included BNP Paribas and Credit Suisse, down 2.7 and 2.2 percent respectively.
"People are concerned about the capital adequacy of banks, and whether they might need to raise more capital," Bon said. Across Europe, Germany's DAX fell 0.2 percent, while London's FTSE 100 and France's CAC 40 fell 0.7 and 0.9 percent respectively.
Ireland's ISEQ, Spain's IBEX, Portugal's PSI 20 and Italy's FTSE MIB fell between 0.5 and 2.3 percent. The Thomson Reuters Peripheral Eurozone Countries Index was down 1.3 percent.
Miners featured among the biggest losers, tracking a sharp decline in metals prices on tensions in the Korean peninsula. Antofagasta, Kazakhmys and Vedanta fell between 2.4 and 3.2 percent. Autos gained with Daimler and BMW up 0.9 percent on reports they will shorten their holiday period due to strong demand.
Data due later includes the second estimate of third-quarter U.S. GDP, giving an indication of the strength of recovery in the world's biggest economy.
(Additional reporting by Atul Prakash; Editing by David Hulmes)