Stocks higher on Greek government tumult

European stocks have jumped on hopes that a planned Greek referendum on the eurozone bailout package may now be scrapped.

Prime Minister George Papandreou shocked markets on Monday by announcing a referendum on the country's bailout.

But on Thursday afternoon, he told parliament that he would drop the plan if the opposition party agreed to support the bailout package.

The Dax index in Frankfurt ended the day 2.8% higher.

French stocks gained 2.7% and the UK's FTSE 100 was up 1.1%. Italian stocks gained 3.2%.

The rallied continued into US trading hours, and the Dow Jones ended the day 1.8% higher.

Stock markets were also given a boost by the European Central Bank's surprise decision to cut interest rates, to 1.25%.

Bank shares - led by those in France, which are among the most exposed to Greek debt - jumped higher.

BNP Paribas rose 7.5%, despite announcing a 72% fall in quarterly profits. This was mainly due to the fact that it had written off 60% of its Greek debt exposure.