* FTSEurofirst 300 up 0.2 pct, Euro STOXX 50 flat
* Stocks build on sharp two week rally
* Monte Paschi recovers most of early losses after cash call delay
By Alistair Smout
LONDON, Dec 30 (Reuters) - European stocks edged higher on Monday, consolidating in holiday-thinned trade after two weeks of strong gains that have pulled markets to five-year highs.
Italian lender Monte Paschi failed to open in early trade after its shareholders voted on Saturday to delay a vital cash call, but the stock later recouped most of early losses of as much as 5.6 percent.
The pan-European FTSEurofirst 300 index was 0.2 percent higher at 1,315.97, having ended up 1.1 percent at 1,314.29 points on Friday, its highest closing level since mid-2008.
The benchmark index, which is up around 6 percent in the last fortnight, is on track to post a gain of 16 percent for 2013, with just two sessions left in the year.
The euro zone's blue chip EuroSTOXX 50 was flat after rallying 6.6 percent over the last two weeks. It also closed at a five-year high on Friday.
Both indexes have been boosted following the U.S. Federal Reserve's decision to temper the scaling back of its stimulus programme with the promise of lower interest rates for longer. The U.S. economy also seems to be strengthening, albeit from a weak base.
"The conditions for the market remain very favourable. Even if the fundamentals aren't looking great yet, central banks remain easy (on policy) for the time being, despite (Fed tapering)," Gerard Lane, equity strategist at Shore Capital, said.
"People believed (ECB president Mario) Draghi when he said he'd do whatever it takes (to protect the euro), and so long as he and the Fed remain easy, that supports markets and helps them look through issues like we've seen with Monte Paschi."
Excessive losses initially prevented Monte Paschi from opening after the shareholder vote, which increased the risk that Italy's third-biggest bank could be nationalised. It later partly recovered to trade 2 percent lower.
Craig Erlam, market strategist at Alpari, said many investors expected the recent strong trend to continue into January, although near-term trade would likely be muted.
"Trading volumes are expected to remain low for most of this week, if not all of it, with another bank holiday coming on Wednesday. Volumes on Monday and Tuesday should be particularly low."