European shares recovered from earlier losses on Thursday on hopes a potential collapse of the Greek government would avoid a referendum on its bailout package, easing some concerns of an imminent Greek default.
Banks, the main focus earlier due to their sovereign debt exposure, pared losses on the expectation, with the STOXX Europe 600 Banks index up 1 percent after earlier losses, while the Greek bank stocks index jumped 5 percent.
"People are thinking Papandreou's government falls and therefore the referendum is postponed, but it's obviously wishful thinking because it doesn't fix any issues," a trader at a European investment bank said.
"The referendum may be postponed, but it would be replaced by a general election, which would be a similar vote. The opposition party don't want to leave, but the euro and the subject will come up in the general election and the people will be able to vote for someone who wants to leave the euro.
By 0953 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.6 percent at 977.14 points after being falling as much as 956.24 points.