* Athens stocks fall 3.2 pct after anti-austerity Syriza win
* FTSEurofirst 300 up 0.6 pct to new 7-yr high
* Investors take profit on Greek uncertainty
* QE optimism contains damage in markets (Updates with closing prices)
By Alistair Smout
LONDON, Jan 26 (Reuters) - Greek stocks fell in volatile trade on Monday after anti-austerity party Syriza swept to victory in Sunday’s election, while other European equities kept rising on the promise of European Central Bank bond-buying.
Athens’s ATG index fell 3.2 percent, led lower by a slump in banks such as Piraeus Bank, down 17.6 percent, and Alpha Bank, down 11.6 percent, as investors fretted about a possible stand-off with Greece’s EU/IMF lenders and possible implications for liquidity and depositor confidence in the sector.
Greek shares briefly turned positive in volatile trade before turning lower again, after leftwing leader Alexis Tsipras struck a deal to form a government with a right-wing party that also opposes the terms of Greece’s 240 million euro bailout.
Syriza has promised an end to years of painful austerity and said it wants Greece’s debts restructured, which could put Athens on a collision course with euro zone partners and threaten its continued membership of the single currency.
“There’s a lot of uncertainty in the markets at the moment with regard to Greece. While it has formed a coalition, we don’t really know how effective their agenda of debt renegotiation will be,” Coutts global equity strategist James Butterfill said.
Butterfill said that while the quick formation of a new government was welcome, there were still doubts over Greece’s continued membership of the euro, even though Syriza has said it intends to work with creditors on a new deal.
“Wealthy individuals may take money out of Greek banks and move them into other euro zone banks, where they feel protected against the Greek exit worry,” he added. “You could see a liquidity squeeze in Greek banks.”
Pireaus closed at an all time low, giving up gains made in an 8.7 percent rally last week.
Across Europe, euro zone shares were supported by the ECB’s new stimulus measures to revive the euro zone’s economy.
The pan-European FTSEurofirst 300 index was up 0.6 percent at 1,488.03 points, to set a fresh seven-year closing high, with German and French benchmarks up 1.4 percent and 0.7 percent.
Southern European markets recovered from early falls, with Italy’s MIB index, Portugal’s PSI 20 and Spain’s IBEX all 1.1 percent to 1.2 percent higher.
Investors said the move by the ECB to buy government bonds added to the appeal of European equities, with markets much more insulated from turmoil in Greece than they were during the region’s sovereign debt crisis of 2012.
“The aftermath of the Greek elections is likely to keep volatility elevated, but in our view the factor which will end up as the dominant one is the turn in euro zone’s activity momentum,” analysts at JP Morgan wrote in a note.
“The turn in euro zone’s macro momentum is happening right at the time when ECB is starting to act more aggressively ... we would recommend using any dips as opportunities to buy.”
International Consolidated Airlines Group (IAG) rose 2.4 percent after Aer Lingus said it was considering an improved 1.36 billion euro ($1.5 billion) takeover proposal from the owner of British Airways.
It is the third attempt by IAG to buy its Irish rival, which traders said makes strategic sense for the airline. Aer Lingus rose 0.9 percent.
Today’s European research round-up (Editing by Catherine Evans and Crispian Balmer)