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Europe shares close lower as shutdown fears weigh

European market closes lower

European shares closed lower on Monday as the partial government shutdown in the U.S. continued, and as investors worried that the impasse could lead to the country defaulting on its debt.

European Markets: FTSE, GDAXI, FCHI, IBEX

The pan-European FTSEurofirst 300 provisionally closed down 0.3 percent at 1,40.08 points, off earlier lows that saw it slip to its lowest in around a month.

There are growing fears that the budget deadlock in the U.S. could run on, potentially hampering attempts to solve a greater challenge, that of raising the debt ceiling limit. That must be agreed upon before October 17, if the country is to avoid defaulting on its debts.

On Sunday, Treasury Secretary Jack Lew said that Congress was "playing with fire," and warned the U.S. could default in just over a week.

Republican Speaker of the House John Boehner vowed not to allow a vote on raising the debt ceiling to take place without a "serious conversation" about what was driving the debt.

Speaking to ABC over the weekend, Boehner also warned the U.S. was on the path to a credit default. Democrats reposted that it was reckless of Boehner to raise the possibility of a default.

"Comments yesterday by House Speaker John Boehner that he would not facilitate bills to reopen the government or lift the debt ceiling in the absence of an agreement to wide-reaching talks on fiscal policy suggest that we should not anticipate an early resolution," Chris Scicluna, an economist at Daiwa Capital, said in a research note.

The FTSE 100 closed unofficially down 0.3 percent; the German DAX closed down around 0.4 percent. Meanwhile, U.S. stocks were off lows in late morning trade, after the Dow touched a one-month low.

Greek stocks higher

In Greece, a draft budget for next year was presented to parliament by the Finance Ministry on Monday. Greek stocks were the standout gainer on Monday, closing up 2.5 percent, helped by the bullish tone set by U.S. hedge fund managers such as John Paulson.

(Read More: Paulson leads hedge funds charge into Greek banks)

Monte dei Paschi shares surge

Shares of Italian lender Monte dei Paschi surged to close 6.26 percent higher and lead the Euro Stoxx 600 index. After the market close it unveiled a strict turnaround plan aimed at regaining profitability and fending off nationalization.

In stocks news, shares of European airlines firm Air France KLM closed 1.18 percent lower after it reported weak cargo traffic for September. After the close on Friday, the group said 1,800 of its planned 2,800 job cuts would target ground staff.

Shares of luxury goods maker Burberry closed 1.2 percent lower after CEO Angela Ahrendts warned Les Echos newspaper of slowing sales in China, although she added that the firm has done better than forecast.

In addition, Marks & Spencer closed 2.77 percent lower after a downgrade from Credit Suisse.