* FTSEurofirst 300 up 2.2 pct, volatility sinks
* Telecoms outperform after Bouygues approach
* Greek shares up 9 pct, Greek banks up 20.8 pct
By Atul Prakash and Lionel Laurent
LONDON, June 22 (Reuters) - European shares climbed to their highest level in more than a week on Monday, anticipating some progress on Greece's debt crisis after months of wrangling with international creditors.
The telecoms sector outperformed the broader market after a takeover bid for France's Bouygues Telecom reignited hopes for more corporate deals.
Greek stocks surged 9 percent, with the local banking sector jumping nearly 21 percent. Investors have been nervous that deposit outflows may prompt capital controls.
"It's a relief rally, but it has got a long way to unfold. There is a 75 percent chance that it will be sorted out and Greece will remain in the euro zone," Nick Lyster, European CEO of Principal Global Investors Europe, said.
Euro zone officials welcomed Greek concessions on Monday as a possible step towards a deal on averting a default, but politicians dismissed expectations of a breakthrough at a summit later in the day to secure the country's future in the euro.
Hopes rose as the officials accepted the reform proposal for the first time as a "reasonable" basis for negotiating an aid-for-reforms agreement between Athens and its creditors at the EU and the International Monetary Fund.
"We remain of the view that the most likely outcome ... is a deal," Credit Suisse analysts said in a note. "An unfortunate but predictable feature of European crisis decision-making is that such deals are only ever made at the last minute, 'at the edge of the abyss'."
The pan-European FTSEurofirst 300 index was up 2.2 percent at 1412 GMT. The euro zone's Euro STOXX 50 was up 3.6 percent and headed for its best one-day percentage gain since August 2012. The VSTOXX measure of European stock-market volatility slumped to its lowest level in 10 days.
Blue-chip indexes in London, Paris and Frankfurt rose 1.5 and 3.2 percent, with IG strategist Chris Weston saying that some 71 percent of all open trading positions held by IG clients were bets the DAX index will rise.
The top gainers of the day among European shares were telecom stocks, with Bouygues up 13.4 percent after Monday's confirmation of a takeover bid from Altice via its Numericable-SFR subsidiary, which itself rose 14 percent. Altice shares were also up 14 percent.
"Conditions are right for a further pick up in M&A activity as we are witnessing some positive factors such as high corporate confidence and still cheaper lending. Rising average deal premiums are indicative of growing confidence in M&A deals," James Butterfill, global equity strategist at Coutts, said.
According to Coutts data, the ratio of cash to total assets with STOXX Europe 600 companies is now about 4.5 percent, against a quarterly average of 2 percent since 1998 until the financial crisis in 2008, indicating that the M&A appetite of European companies remains strong.
British broadcaster Sky gained 3 percent after the Sunday Telegraph reported that the Murdoch family was said to have rebuffed two offers for its stake.
Deal hopes also propelled UK chocolatier Thorntons' shares up a whopping 42 percent after Ferrero International SA offered to buy the company at a premium of about 42.9 percent to its closing share price on Friday. (Editing by Alison Williams)