* Athens' ATG index slides, Greek bank stocks slump
* Greek worries impact Italian bonds, Milan FTSE MIB falls
* Germany's Metro falls after Galeria Kaufhof sale deal
* Europe bourses in 2015: link.reuters.com/pap87v
* Asset performance in 2015: link.reuters.com/gap87v (Recasts, adds quote, detail)
By Alistair Smout and Sudip Kar-Gupta
LONDON, June 15 (Reuters) - European shares fell and volatility rose on Monday, led lower by a slide in Greek shares after there was little progress in talks between Greece and its creditors to resolve its debt crisis.
The pan-European FTSEurofirst 300 dropped 1.1 percent to 1,526.81 points, sinking towards a 3-1/2 low hit last Tuesday.
Volatility on the EuroSTOXX 50, or VSTOXX, rose by 2 points, having been as high as 27.75 points in early trade, its highest level since Greece's election back in January.
The crude measure of investor fear has risen to 5-month highs even as the U.S. VIX has almost halved in that time.
Germany's EU commissioner said on Monday it was time to prepare for a "state of emergency" after talks collapsed at the weekend to rescue Greece from default and ejection from the euro.
Athens' benchmark ATG equity index fell 4.7 percent, with the Athens Stock Exchange FTSE Banks Index down 9.85 percent. National Bank of Greece fell 11.6 percent and Bank of Piraeus dropped 13.6 percent.
"There's been no progress on Greece, so I expect European stock markets will undergo further selling pressure in the near-term," said Berkeley Futures' associate director Richard Griffiths.
Euro zone banks were down 2.2 percent, set for its biggest fall in six weeks, led lower by Greek banks but also shares from other peripheral euro zone markets.
Italy's FTSE MIB equity index fell 1.9 percent, with banks Monte Paschi, Intesa Sanpaolo and Banco Popolare down 2.8-4 percent as worries over Greece's debt situation hit the Italian bond market.
While the ATG is down by around 11.5 percent since early January, the FTSEurofirst 300 has managed to rise around 12 percent, supported by asset purchases from the European Central Bank.
Despite the resilience of European shares to the Greek turmoil this year, Monday's drops left investors hoping a deal would be reached so that the ramifications of default were not more widely felt.
"The troublesome negotiations raise the question as to whether the parties are still committed to reaching agreement. We continue to have faith, as a Grexit would benefit nobody," Ruth van de Belt, Investment Strategist at Kempen Capital Management, said in a note.
Germany's DAX retreated 1.4 percent, leaving the index some 11 percent below a record high set in April, while France's CAC declined by 1.1 percent.
German retailer Metro was among the worst-performing stocks, retreating 4 percent after agreeing to sell its Galeria Kaufhof chain to Canadian department store operator Hudson's Bay for 2.8 billion euros - less than some estimates of a 2.9 billion euros price tag for Galeria Kaufhof.
Today's European research round-up (Editing by Kevin Liffey)