UPDATE 2-Ryanair reaches agreement with Irish union in pilots dispute

* Irish union recommends that pilots accept agreement

* Ryanair endured worst one-day strike earlier this month

* Breakthrough sends Ryanair shares up over 5 percent (Adds reaction from Dutch union)

DUBLIN, Aug 23 (Reuters) - Ryanair reached an agreement with the trade union representing its Irish pilots on Thursday, a breakthrough that sent its shares sharply higher as the budget airline strives to quell staff protests around Europe.

Ryanair passengers have suffered hundreds of flight cancellations this summer because of protests by pilots over slow progress in negotiating collective labour agreements, hitting average fares at Europe's largest low-cost carrier.

The Irish airline endured its worst one-day strike earlier in August after a walk-out by pilots in five European countries disrupted the plans of an estimated 55,000 people at the height of the summer holiday season.

That included a fifth 24-hour walkout of the summer by around a quarter of its pilots in Ireland that prompted Ryanair to propose fresh talks with the help of a mediator that began last week and ended early on Thursday after a 22-hour session.

"The proposed agreement will now go to ballot, with a recommendation for acceptance from Forsa and its Ryanair pilot representatives," pilots' union Forsa said in a statement, adding the talks' mediator asked that neither side makes further comment while the ballot is conducted.

Ryanair said it would take the proposals to its board after the Irish-based pilots had voted on the agreement.

Some of the other trade unions stuck in negotiations around Europe have said they are watching the Irish talks closely, although Dutch pilots' union VNV saw little read across, saying the Irish agreement did not appear to cover all the issues at stake, and was limited to base transfers and promotions.

"We shall have to study the details, but for now we don't see much in this agreement for us to build on, as we have different priorities," VNV spokesman Joost van Doesburg said, basing his assessment on documents the union had seen so far.

Dutch pilots were among those that took part in the Aug. 10 strike.

Ryanair employs more than 4,000 pilots, with around 350 of them based in Ireland. Negotiations in the country have been among the most difficult, the company has said.

Shares in Ryanair were 5.9 percent higher at 13.93 euros at 1005 GMT, top of the regional STOXX 600 benchmark index.

The stock is still down 15 percent since the strike action ramped up in mid-July and remains below the 14.21 euros it slumped to in December when Ryanair shocked markets by agreeing to recognise unions for the first time in its 30-year history. (Additional reporting by Bart Meijer in Amsterdam; Editing by David Goodman and Mark Potter)