European shares closed slightly lower on Monday with fears of a government collapse in Italy dragging down the FTSE MIB, and with U.K. markets closed for a holiday.
The Euro Stoxx 50 provisionally closed down 0.2 percent, with Italy's FTSE MIB was down 2.1 percent.
Shares in Italian broadcaster Mediaset fell 6.25 percent over fears that Silvio Berlusconi, who owns the company, could see his control weaken as he is embroiled in yet more political bickering.
Berlusconi is at the center of a war of words between his People of Freedom Party (PDL) and Prime Minister Enrico Letta's Democratic Party (PD).
The PDL on Sunday openly warned that it would bring down the Italian government if PD party members vote to expel Berlusconi after his tax fraud conviction, according to Reuters news agency.
David Lea, senior analyst at Control Risks, told CNBC that trouble is never far away when Berlusconi was still involved in Italian politics. "Things will never be calm and stable while he's around," he said.
In the U.S., stocks ticked higher Monday, with the Dow edging above the psychologically-important 15,000 mark, as a weaker-than-expected durable goods report eased worries that the Federal Reserve will scale back its stimulus efforts.
In Europe, a technical glitch at Germany's Eurex - which provides trading on derivative contracts - meant futures trading was halted briefly as markets opened on Monday. Trading was resumed at 8.30 London time. The U.K.'s FTSE 100 was closed for a public holiday.
The CEOs of both German semiconductor manufacturer Infineon and cable supplier Leoni told CNBC that it was crucial for the country's next government to maintain political stability. It came after German Chancellor Angela Merkel sought to reassure voters on Sunday that Greece would not need a debt write down. The issue has come to the fore in the political campaign ahead of elections on September 22.
In Asia, China stocks outperformed Asian equity markets on Monday on economic optimism, while sentiment in other Asian shares rose after weak U.S. data soothed fears that the U.S. Federal Reserve would reduce its stimulus program soon.
In stocks news, Dutch telecoms group KPN announced improved terms for the sale of its German business to Spanish telecom firm Telefonica. Shares in Telefonica closed higher by 0.14 percent, with shares of KPN climbing by 3.01 percent.
(Read More: Telefonica improves offer for KPN's E-Plus)
Italian banks, which have rallied since late June, were among the worst hit by the political situation in Rome, with UniCredit, Intesa Sanpaolo and Banco Popolare falling by 3.5, 3.33 and 4.23 percent respectively.
Shares in Sanofi were higher after its vaccines division, Sanofi Pasteur, announced positive findings regarding a new trial of its Fluzone High Dose vaccine. Shares provisionally closed up 2.28 percent.
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