Spain's IBEX gained 1.4 percent, led by its banking stocks, as worries over Catalonia settled after a successful Spanish debt auction.
Shares in Banco Sabadell rose 3.5 percent on news the bank's board would meet to discuss moving their headquarters out of Catalonia's capital city, Barcelona.
Sabadell led gains on the main share index, closely followed by Caixabank, also headquartered in Barcelona.
Financials together added 57 points to Spain's main share index, which was on track for its best day since Sep 27. On Wednesday, it suffered its worst losses since the aftermath of Britain's vote to leave the European Union.
Firm demand at Spain's bond auction helped ease concern over the effects of Catalonia's independence referendum last Sunday .
"The political turmoil and subsequent sell-off for Spanish assets is in stark contrast to the latest data in the country," wrote Deutsche Bank macro strategist Jim Reid in a note, pointing to strong services PMI figures.
Analysts said Spanish banks in particular had benefited from the country's improving economic growth, and recent share declines and debt insurance cost increases should be seen in context.
"Throughout this year, the Spanish economy has been continuing to do extremely well, and the banks have been big beneficiaries of that," said Jefferies banks analyst Benjie Creelan-Sandford. "Clearly, share prices have come under pressure, but Caixabank and Sabadell are still up around 20 percent year-to-date."
The pan-European STOXX 600 index index and Germany's DAX were both down around 0.2 percent, with the German benchmark sliding from the record high it reached on Wednesday.
A quarterly Reuters poll published on Thursday showed that Spanish stocks were expected to end 2017 up nearly 14 percent, a drop from the 20 percent rise seen in the previous poll.
The poll predicts the DAX will rise 13 percent this year and 5 percent in 2018. France's CAC is seen up 11 in 2017 and 7 percent in 2018. Italy's FTSE MIB is the front-runner to end 2017 as the best-performing country index .
The biggest declines on the STOXX came from shares in Assa Abloy, down 4.9 percent, after it said Chief Executive Johan Molin may step down next year after more than a decade running the Swedish lockmaker.
Osram Licht declined 4.3 percent after Siemens sold its remaining 17 percent stake in Osram for 1.2 billion euros, severing links with its former unit.
Europe's bank index fell for a second day, dragged down by a drop in Barclays following a downgrade at Exane.
Banks were hit this week by worries over Spain and news that the ECB will ask banks to set aside more cash to cover newly classified bad loans.
Mid-tier Italian lender Creval fell 10 percent, with traders citing a downgrade by an Italian broker, who said the bank may need a cash call to fund further loan-loss provisions following the ECB decision.
Utilities were led higher by French power company EDF, which gained 4.2 percent after an upgrade to "buy" at Jefferies.
Telecom Italia rose 1.6 percent after its chairman said he had no "preconception" about a possible spin-off of the phone group's fixed-line network.