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* FTSEurofirst 300 down 0.4 pct, hits 2-month low
* Tensions rise ahead of U.S. fiscal cliff talks
* Despite headwinds, risks seen on the upside
By Blaise Robinson
PARIS, Nov 16 (Reuters) - European share indexes surrendered early gains on Friday morning as the persistent worries about the euro zone debt crisis and U.S. budget negotiations rattled investors, with banking stocks featuring among the top fallers.
Commerzbank was down 2.9 percent, Natixis down 2 percent and Mediobanca down 1.5 percent, contributing to a 0.4 percent fall in the FTSEurofirst 300 index of top European shares to 1,074.14 points.
The index, which hit a two-month low on Friday, is on track to post a weekly loss of 2 percent, its worst weekly performance since late September.
Investors continue to fret about how the U.S. government will avoid stepping off the $600 billion 'fiscal cliff' of spending cuts and tax rises which automatically kick in in the new year without a political agreement on setting the budget. President Barack Obama and congressional leaders are set to hold talks later on Friday.
Investors fear that a deadlock in negotiations would automatically trigger the spending cuts and tax hikes, which could drag the U.S. economy back into recession.
But the despite the market's slide this week, many fund managers remain positive on the longer term outlook for equities.
"We're waiting for a few triggers: a deal to avoid the fiscal cliff which should come before Dec. 14, Spain's bailout request, and a new tranche of aid for Greece before the end of the month," Barclays France director Franklin Pichard said.
"The downside potential is limited on the market. We're just waiting a bit before turning more aggressive," he said.
Greece was in focus again on Friday, with brewing concerns over the country's debt sustainability and a row between euro zone governments and the IMF over how to make Greece's huge debt manageable, blocking the release of 31 billion euros in loans that the country needs to stay afloat.
David Thebault, head of quantitative sales trading, at Global Equities, said investors should start looking beyond the current headwinds, and buy stocks with a horizon of at least six months.
"I think it's time to scoop up stocks ... although with some put spreads to protect the portfolio in case of a 5 percent dip before the end of the year," he said.
Around Europe, UK's FTSE 100 index was down 0.5 percent, Germany's DAX index down 0.8 percent, and France's CAC 40 down 0.5 percent.
Tech stocks bucked the trend, with SAP gaining 1 percent. The company's co-CEO said on Friday the group is ahead of its plan to reach more than 20 billion euros in sales by 2015.