The Athens Stock Exchange FTSE Banks Index rose 14.2 percent, its best one-day percentage gain since February, and the rise in the banks in turned pushed up the broader Greek ATG equity index by 7 percent.

The Greek shares got a boost as German Chancellor Angela Merkel said Greece had told European partners it was committed to intense discussions with creditors to solve all open issues and avoid a looming default at the end of the month.

The Athens stock market has been hit this year by concerns over the debt problems of Greece, which has had to be bailed out by international creditors. Greece will be in default at the end of June without fresh funds to let it to repay 1.6 billion euros (1 billion pounds) to the International Monetary Fund.

However, there were increasing signs of progress, with a senior European Union official telling Reuters that Greece and its creditors could reach a deal in their cash-for-reforms talks next week.

"We are doing some business in Greek stocks. The Germans will come up with some kind of solution," said Rupert Baker, an equity sales executive at Mirabaud Securities.

In spite of Thursday's rally, Athens' ATG index remains down by around 1 percent since the start of 2015, underperforming a 14 percent rise on the pan-European FTSEurofirst 300 index, while the Greek bank index is down around 30 percent.

Some traders remained cautious, given the propensity of Greek stocks to swing up and down based on comments from politicians on the state of the country's debt talks.

"It merely looks like talks have 'intensified' which ultimately leaves us exactly where we were and makes one wonder whether Greece will manage to fudge a deal at this point at all. There is no deal just an agreement that a viable solution needs to be found," said London Capital Group head analyst Brenda Kelly.

(Editing by Alison Williams)

By Sudip Kar-Gupta