* FTSEurofirst 300 falls 0.4 pct in choppy trade
* Greek debt concerns hurt sentiment, Greek banks slip
* Retail shares feature among top decliners
By Atul Prakash
LONDON, June 16 (Reuters) - European shares slid to a three-month closing low on Thursday, with investors' risk appetite waning further as political discord and uncertainty over a second Greek bailout package hurt market sentiment.
The Euro STOXX 50 volatility index , one of Europe's main barometers of market sentiment, climbed to a three-month high, suggesting a rise in investors' desire to buy equities.
Greek banks hit 15-year lows, Greek shares fell 2.8 percent, the Thomson Reuters Peripheral Eurozone Banks index was down 0.4 percent and the Peripheral Eurozone Countries Index fell 0.5 percent.
The FTSEurofirst 300 index of top European shares finished 0.4 percent lower at 1,084.47 points, the lowest close since mid-March. It had fallen to a low of 1,074.79 earlier in the day, but pared losses on U.S. economic numbers. "The Greek debt situation is adding a very large dose of caution and may be hastening people to take profits, where they exist," said Keith Bowman, analyst at Hargreaves Lansdown.
"In the near term, if we get some further support from Germany, then that might provide a little bit of upside."
Sources said Germany wants to delay the deadline for the second Greek aid package to September, reflecting disagreement within Europe on how to involve the private sector in a deal without triggering a default.
The International Monetary Fund said continued financial support for Greece was subject to Athens adopting already agreed reforms, while Greek Prime Minister George Papandreou struggled to quell a revolt in his socialist party against EU/IMF-ordained austerity measures.
"It is the contagion effect, which is unnerving markets. It is not just about Greece, but about who is the next," said the head of investment dealing at a fund company that manages $80 billion. "We need a proper long-term solution, not a plaster."
Spanish 10-year government bond yields hit 11-year highs and other peripheral bonds suffered after tepid demand at a Spanish debt auction added to worries Greece's crisis was spilling over.
FINANCIALS UNDER PRESSURE
The STOXX Europe 600 financial services index fell 1.1 percent, the banking sector index dropped 0.2 percent and Aberdeen Asset Management fell 2.1 percent.
Financials have been under selling pressure on growing concerns that a haircut on Greek debt or even a default would trigger big write-offs in the banking sector.
Credit Suisse said Greek banks have priced in a 35 percent haircut in Greece's government bonds and a recapitalisation of its core Tier I capital to 9 percent.
Barclays was down 1.3 percent after falling to its lowest for more than two years as investors and analysts gave a cool response to a revamp plan aiming to cut costs and generate over 6 billion pounds of extra revenue.
Retail shares featured among the top decliners, with the sector index down 1.3 percent. French supermarket chain Carrefour fell 3.5 percent, weighed by a UBS downgrade to "sell" from "neutral".
Equities pared losses after data showed new applications for U.S. jobless benefits fell in the latest week, while housing starts rose more than expected. But a slump in factory activity in the Mid-Atlantic prompted investors to stay cautious.
"We have got these question marks continuing over the strength of the U.S. economy, not helped this afternoon by a mixed batch of releases," Bowman said.
Charts sent bearish signals. The Euro STOXX 50 , the euro zone's blue chip index, fell 0.03 percent to 2,730.62.
"The market is certainly struggling. I would be concerned if we start closing below 2,673 points as that would suggest that the slow, choppy uptrend is petering out," said Phil Roberts, chief European technical strategist at Barclays Capital.
He said the 2,673 level was a swing target based on the price action since February. (Additional reporting by Simon Jessop; Editing by Jon Loades-Carter)
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