Banks and insurance companies led the way ahead in Frankfurt after the upper house of parliament approved a watershed tax reform measure aimed at speeding up the country's economic restructuring.
At 5.30 p.m., the Xetra DAX index was 122.05 or 1.7 per cent ahead at 7,318.04, but off an intraday high of 7,342.22.
The tax measure will exempt corporate asset sales from capital gains tax. This will prove especially beneficial for financial groups, opening the way for a sell-off of unwanted investments.
Paris bourse was closed for Bastille day.
Insurers led the pack, with Allianz up €25.85 or 7 per cent at €395.34 while reinsurer Munich Re was €23.81 or 7.7 per cent higher at €336.
Deutsche Bank rose €3.06 to €93.66 while Commerzbank added €1.10 to €38.25 and Dresdner Bank climbed €2.42 to €45.02.
Tech stocks were firm, led by semiconductor maker Infineon Tech- nologies' €4.70 rise to €85.10.
Metro rose €2.21 to €46.60 as the retailer declined to comment on a report in FT Deutschland that a group of private investors planned to take a stake in the group for about $2.3 billion.
Amsterdam touched an intraday all-time high of 691.85 on the AEX blue-chip index after encouraging US producer price data. But pre-weekend profit-taking kicked in to leave the index barely changed at 687.36.
IT companies were strong again on the back of a positive Nasdaq. Getronics rose 2 per cent to €17.26 and ASM Lithography added 4 per cent to €48.80.
Zurich edged lower as a second weak day for pharmaceuticals outweighed strong performances from SAirGroup and UBS. The SMI index finished 12.8 easier at 7,938.9.
Novartis slid SFr22 to SFr2,595 and Roche certificates gave up SFr200 to SFr16,200 as investors switched out of the European-wide sector amid concerns about possible US price controls.
SAirGroup, the holding company of Swiss flag carrier Swissair, shot up SFr17 or 6 per cent to SFr299 amid reports that Swiss investor Mr Martin Ebner might be a buyer.
Helsinki added a modest 0.7 per cent to 16,676.69, pulled up by Sonera's healthy gain of 5.6 per cent to €54.90 while hot stock of the day was plastics component maker Eimo. It closed 17.3 per cent higher at €8, after initially touching €8.60, on its announcement of a bid for US peer Triple S.
