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* FTSEurofirst 300 down 0.3 percent
* Aggreko drops 16 pct, cautions on 2013 outlook
* KPN shares plunge after dividend cut
By Tricia Wright
LONDON, Dec 17 (Reuters) - European shares fell at the start of what is likely to be a volatile week on Monday given uncertainty over U.S. budget talks.
Temporary power provider Aggreko was the top faller after its latest update.
The FTSEurofirst 300 was down 0.3 percent at 1,129.93 by 0946 GMT, having dipped 0.1 percent in the previous session. Trading volumes stood at 18 percent of the 90-day daily average.
Many in the market believe a deal on the U.S. budget will be struck, but any news to the contrary could open the way to fresh index falls, especially as traded volumes remain thin.
"We're a bit jittery here that there's not going to be significant progress... Ultimately I think we will get a deal, but all the risk is on the downside," Joe Rundle, head of trading at ETX Capital, said.
"Every day we tick on now people are going to get a bit more jumpy... I don't think there will be a full-on deal by the 31st of December... but I think if we're poles apart there's going to be a real issue (and the market) will come off really aggressively."
Automatic spending cuts and tax hikes are due to kick in, potentially damaging the U.S. economy, at the end of the year unless an agreement is reached to avoid them.
Rundle reckons the FTSEurofirst 300 could come off as much as 7 percent in the event of disappointment.
Aggreko topped the index's fallers' list, slumping more than 16 percent after it warned on the outlook for its business in a trading update, prompting Investec Securities to cut its rating on the stock to "hold" from "buy".
"Today's news will be seen as a something of a setback... That said, we continue to believe that there are many structural drivers that should continue to drive earnings in the years to come," Investec said in a note.
Telecoms group KPN slid 13 percent, leading falls seen across the sector, after the Dutch state raised much more than expected in its auction of fourth generation (4G) wireless frequencies, with prices so high KPN cut its dividend for this year and next to afford its licences.
Vodafone was another significant faller, off 2.3 percent.