Europe shares turn negative, Spanish banks weigh

LONDON, May 26 (Reuters) - European shares lost ground on Tuesday, giving up gains in early deals after a long holiday weekend for several markets, with Spanish banks among the worst performers after a local-poll hit for Prime Minister Mariano Rajoy.

Shares (Berlin: DI6.BE - news) of Banco Sabadell, Bankia, Caixabank (Other OTC: CAIXY - news) and Popular (NasdaqGS: BPOP - news) were down 1.8 to 2.3 percent at 0734 GMT.

Spain's IBEX index was down 0.8 percent, underperforming a 0.2 percent lower FTSEurofirst 300 index . Both indexes had been in positive territory in earlier trading, helped by a lift from the weaker euro.

"Markets are trying to digest what is going on in Spain and what it means for Greece," said Michael Hewson, CMC Markets analyst. "Anti-austerity parties in Spain have been giving the incumbent government a kicking...That's keeping investors on the back foot." (Reporting by Lionel Laurent; Editing by Alistair Smout)