* FTSEurofirst 300 up 0.2 percent
* Basic resources higher on China boost
* STMicroelectronics ends tie-up with Ericsson
* Banks down on Italy political worries
By David Brett
LONDON, Dec 10 Blue chip shares in France, Germany and the UK helped European stocks close higher on Monday, as political turmoil in Italy unnerved investors and prompted a flight to safety.
The FTSEurofirst 300 closed up 1.84 points, or 0.2 percent at 1,134.53, supported by gains on Germany's DAX and Britain's FTSE 100. Basic resource stocks were the top risers after China reported overnight that its economic recovery remained intact.
French-Italian company STMicroelectronics was the top performer in Europe, up 4.4 percent after it announced plans to quit a loss-making joint venture with Ericsson, which helped the French CAC outperform regional peers.
Periphery Europe, however, came under pressure with Italy's FTSE MIB down 2.2 percent and the spread between 10-year Italian debt and German Bunds widening after Mario Monti announced he would resign once the 2013 budget is passed.
Traders said former Prime Minister Silvio Berlusconi's declared intention to run for office also raised worries that had been bubbling under the surface over political and financial instability in the country.
"There is a clear risk whatever the outcome (of the elections), in the end, the market will be forced into thinking that things are not under control and then the European Central Bank has to intervene," said Nicola Marinelli, portfolio manager at Glendevon King Asset Management.
Monti imposed tax hikes and spending cuts to bring borrowing costs under control and undertook a series of reforms to improve the competitiveness of the economy, which had calmed markets.
But Berlusconi said the former economics professor and European Commissioner's austerity policies had left Italy facing a "recessive spiral without end" and that he had been "besieged" by his party to run for office.
Stocks of companies with direct exposure to the country's debt fell most sharply, with banks down 0.9 percent.
Top fallers were Italian lenders: Intesa Sanpaolo lost 5.2 percent, Banco Popolare was down 5.7 percent and UniCredit down 5.2 percent.
There was a marked difference in investor interest in euro zone equities, with the region's blue chip index down 0.2 percent having traded at 130 percent of its average 90-day daily volume. That compared with Britain's FTSE 100 , which traded just 65 percent of its 90-day daily average.
Spain's leading share index fell 0.6 percent as the decision by Mario Monti posed the question of contagion within the debt-ridden euro zone periphery.
"If markets do become unsettled over Italy we may see contagion into other euro zone economies," analysts at Nomura said in a note.
"Particularly Spain, which has tended to move in tandem with Italy since August 2011 and which faces a heavy year of debt refinancing in 2013, starting in January, against a backdrop of continuing uncertainty over whether prime minister Mariano Rajoy will seek a country bail-out or not," Nomura said.
Investors' appetite for equities remains undiminished approaching the year end, however, with the FTSEurofirst having added more than 6 percent in the last 15 trading days and setting fresh 2012 highs along the way.
Returns attractive compared with other asset classes -European equities are yielding around 4 percent, compared with "safer" bonds on around 2 percent and cash close to zero.
"The world is obviously not without risks, however ... investors should be moving their assets out of cash and other low-yielding assets and into securities offering returns beyond inflation," Dan Morris, global strategist at J.P. Morgan Asset Management, said in a note.
"Equity valuations remain attractive, company earnings continue to grow, and many types of fixed income offer generous yields relative to core sovereign debt," he said.