The FTSE 100 index of leading British shares closed up 52.85 points, or 0.9 percent, at 5,723.65 while Germany's DAX rose 90.81 points, or 1.5 percent, to 6,259.53. The CAC-40 in France ended 26.65 points, or 0.7 percent, higher at 3,951.30.
Wall Street underperformed its European counterparts after the Commerce Department reported a surprise fall in durable goods orders last month and Microsoft and Travelers both reported disappointing results. However, upbeat new home sales limited the losses as the Dow Jones industrial average tries to eke out a 19-month closing high.
By midday New York time, the Dow was down 8.91 points, or 0.1 percent, at 11,125.38 while the broader Standard & Poor's 500 index fell 2.14 points, or 0.2 percent, to 1,206.53.
The main focus in the markets centered on the Greek debt crisis once again after Greek Prime Minister George Papandreou confirmed that the country will activate the euro30 billion ($40 billion) bailout package from the eurozone and the IMF agreed earlier this month.
Earlier this week, the Greek government began discussions about plan details that were expected to last at least ten days. But renewed concerns on Thursday about the Greek government's ability to service its upcoming debt commitments ratcheted up the pressure on Papandreou's government.
Sentiment worsened after the European Union's statistics office said the country's budget deficit in 2009 was more than previously thought and Moody's Investor Services downgraded its rating on the country's debt and warned of possible further downgrades.
Along with European stocks, the euro bounced amid hopes of a resolution to the Greek debt crisis
- by mid afternoon London time, the euro was up 0.6 percent at $1.3367. It had traded as low as $1.3202 earlier in the day.
Though the activation of the facility has shored up confidence about Greece's near-term outlook, investors remain unsure if the country will be able to avoid a default, or at least a restructuring of its debts.
"Greece's debt problems are about solvency rather than liquidity and so the underlying fiscal problem has yet to be properly resolved," said Neil Mackinnon, global macro strategist at VTB Capital.
All eyes will be on whether a near-term resolution of the Greek debt crisis helps to shore up confidence elsewhere
- one of the reasons cited for the eventual bailout facility was a fear of contagion to other debt-laden countries like Portugal and Spain.
