* FTSEurofirst 300 hits fresh 7-year high, before falling back
* Greek banking stocks still up 4.4 pct, extend recent rally
* European profits up 23 pct excluding energy sector -data
By Blaise Robinson
PARIS, Feb 19 (Reuters) - European stocks trimmed gains around midday on Thursday after Germany rejected a new proposal from Athens for an extension of its bailout programme.
The German finance ministry said the proposal fell short of conditions set out by Greece's euro zone partners. "The letter from Athens is not a proposal that leads to a substantial solution," ministry spokesman Martin Jaeger said in a statement.
"In truth it goes in the direction of a bridge financing, without fulfilling the demands of the programme. The letter does not meet the criteria agreed by the Eurogroup on Monday."
Stocks had rallied earlier, with the FTSEurofirst 300 index climbing to a seven-year high, after Greece asked euro zone countries for a six-month extension of its bailout programme, pledging to honour all its debts and not to take unilateral action that would undermine agreed fiscal targets.
At 1239 GMT, the broader FTSEurofirst 300 index was up 0.2 percent at 1,518.97 points in volatile trade.
The Athens Stock Exchange FTSE Banks Index was still up 4.4 percent after rising as much as 15 percent, extending its recent rebound from a 75 percent slump since March 2014. Alpha Bank shares were up 6.4 percent and Eurobank up 3.9 percent.
Around Europe, UK's FTSE 100 index was flat, Germany's DAX index up 0.1 percent, and France's CAC 40 up 0.5 percent.
"At this point, investors think that even if a deal is reached, it won't mean that the 'Greek issue' will be resolved," Mirabaud Securities senior equity sales trader John Plassard said. "There will be serious doubts on whether Greece will fully implement the agreement."
Capgemini surged 6.9 percent after the French IT services company said it expects sales to accelerate this year with improved profitability, fueled by strength in the North American market.
Shares in Air France-KLM fell 7.1 percent after the group warned that overcapacity on some routes and currency swings would offset gains from lower oil prices this year. It will step up cost cuts and ease a key debt reduction goal.
Half-way into the earnings season, European corporate results have been positive, with 56 percent of companies meeting or beating earnings forecasts, according to Thomson Reuters StarMine data. In absolute terms, quarterly earnings are up 8.6 percent on average and 23 percent when excluding results from the energy sector, hard hit by the drop in oil prices.
Europe bourses in 2015: link.reuters.com/pap87v
Asset performance in 2015: link.reuters.com/gap87v
Today's European research round-up
Editing by Larry King