* FTSEurofirst 300 up 0.8 percent
* 85 bln euro bailout for Ireland boosts confidence
* Heavyweight banking shares among top risers
By Harpreet Bhal
LONDON, Nov 29 (Reuters) - European shares rose on Monday, after an 85 billion euro bailout for Ireland helped reassure investors over the country's debt situation, though fears over possible contagion to other euro zone states remained.
By 0927 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.8 percent at 1,095.39 points, having earlier hit a one-week intraday high at 1,096.38 points.
The index shed 1.5 percent last week, partly on persistent worries over the possibility of contagion of the debt troubles in the euro zone.
EU finance ministers on Sunday endorsed the 85 billion euro ($112.6 billion) bailout package for Dublin, including 10 billion euros to recapitalise Irish banks in the coming months and 25 billion more for them if needed.
Banks were among the main risers, with the National Bank of Greece up 4.1 percent, Allied Irish Banks rising 7.3 percent and Royal Bank of Scotland up 2.7 percent.
The spotlight now turns to the finances of Portugal and Spain, which investors worry could be the next casualties in the euro zone debt crisis, as the euro fell to a two-month low.
"What is required is... an increase in the size of the European Financial Stability Fund. Investors are worried that what is left in the EFSF isn't big enough if Spain had a problem," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.
The EU also outlined a permanent system to resolve the euro zone debt crisis in which private bondholders could be made to share the burden of restructuring a euro zone's sovereign debt bought after 2013, subject to a case-by-case evaluation.
"The idea of a rescue package in principle is very positive but the idea that you could be taking hits on bonds is negative. At the very least you will be exposed to a potential loss if you fund a country that runs into trouble," McAlinden said.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 rose 0.4 to 0.8 percent, while the Thomson Reuters Peripheral Eurozone Countries Index added 1.1 percent.
RECOVERY SEEN
On the macroeconomic front, the Conference Board leading economic index (LEI) for the euro zone -- which indicates economic development up to six months ahead -- rose 0.4 percent to 114.0 in October, pointing to continued economic recovery.
"Ongoing concerns about the impact of the unfolding financial crisis on Europe's already modest growth potential should not be overstated," said Jean-Claude Manini, the Board's senior economist for Europe.
Among individual movers, Austria's Raiffeisen Bank International rose 3.1 percent after it confirmed its full-year outlook
Oil majors were also on the rise, as crude prices climbed to a two-week high above $85 as the dollar weakened across the board following the Irish bailout announcement.
BP added 1.4 percent after the oil major agreed to sell its stake in Argentina-based Pan American Energy to Bridas Corp, half owned by China's CNOOC as it raises cash to pay for the Gulf of Mexico oil spill.
Within the sector, Royal Dutch Shell and Total both added around 1.2 percent. ($1=.7551 Euro) (Editing by Jon Loades-Carter)