* FTSE 100 flat
* Sterling surges as Barnier points to Brexit deal
* RPC jumps 18 percent on private equity takeover interest
* Banks boosted by Italy budget relief
* Debenhams sinks 10 pct on restructuring
(Updates prices, adds details, quotes)
By Helen Reid
LONDON, Sept 10 (Reuters) - Britain's top share index gave up early gains on Monday after the pound rose sharply on comments by the European Union's Brexit negotiator, while mid-cap packaging company RPC surged on news of takeover talks with private equity firms.
The FTSE-100 .FTSE , which is dominated by international exporters, tends to fall when sterling firms and vice versa.
The pound hit five-week highs after the EU's Brexit negotiator Michel Barnier told a forum in Slovenia that a divorce deal with Britain could be agreed in six to eight weeks if negotiators were realistic in their demands. FTSE 100, which had gained 0.2 percent in early trading, boosted by bank stocks, fell back to end the day flat, though relief about Italy's budget preparations provided some broad support to bourses across Europe.
Investors' increasing optimism that the Italian government's 2019 budget will respect EU fiscal rules pushed up European banks across the board. Britain's Barclays BARC.L and Lloyds LLOY.L rose 1.3 and 1.1 percent respectively.
Packaging firm RPC RPC.L topped the FTSE 250 and STOXX 600 indices, soaring 18 percent after the company said it was in talks on a possible sale to Apollo Global Management and Bain Capital. announcement came "with the important caveat that neither of these approaches might result in an offer," said Peel Hunt analysts.
"The next month will be pivotal for RPC," they added. "If there is no bid, the bears will take hold, while if there is a bid we expect it to come at a healthy premium to Friday's close of 684p."
AB Foods ABF.L shares fell 0.6 percent after the Primark owner maintained its full-year guidance but like-for-like sales declined more than expected. mixed trading update from ABF, with 2018 outlook being held, but more modest commentary from the company on 2019," said Berenberg analysts.
"This was not wholly unexpected given FX movements and commodity sugar price weakness, but another year of modest space expansion at Primark is disappointing," they added.
Among other notable fallers on the FTSE 100 were miners Fresnillo FRES.L and Glencore GLEN.L , down 2.6 and 1.8 percent respectively as copper prices slid after U.S. President Donald Trump threatened to impose tariffs on virtually all Chinese imports into the United States. small-caps, department store operator Debenhams DEB.L suffered a sharp fall, while the small-cap index was down 0.3 percent overall.
Weekend reports that management has called in KPMG to advise the company on its options sent Debenhams shares down to their lowest ever level, ending the day down 10.2 percent. the weakness in the share price and the recent acquisition of House of Fraser, we must consider the possibility that Mike Ashley's Sports Direct (LON:SPD) - which has a near 30 percent stake in Debenhams - will swoop," said Neil Wilson, analyst at markets.com.