The euro leapt 0.25 per cent to 0.71139 against the pound, reversing earlier gains after reports suggested Alexis Tsipras is ready to accept bailout conditions set by Greece's creditors as Eurozone leaders prepare to discuss the prospect of providing the country with a third bailout later today.
Read more: Every question you have on Greece answered
The FTSE 100 jumped 1.7 per cent, while France's Cac 40 rocketed 2.5 per cent and Germany's Dax rose 2.1 per cent.
The Financial Times reported that a letter from Tsipras to his creditors sent late on Tuesday night showed "only a handful of minor changes" to the conditions.
Greece yesterday requested a new bailout, just hours before the deadline for it to pay €1.6bn (£1.1bn) to the International Monetary Fund (IMF). Under the proposal, it would borrow from the European Stability Mechanism (which, crucially, does not involve the IMF), while restructuring its debts.
According to the FT, Tsipras is likely to accept most of the contentious changes to VAT and pensions proposed by his creditors.
However, last night German Chancellor Angela Merkel said Germany would not discuss any new bailout until after a referendum on current proposals, due to take place on Sunday.
Eurozone ministers will discuss the proposal at 5.30pm Brussels time.